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KYC non-compliance


Govt deactivates ID numbers of 2.1 million directors

The government began the process of deactivating the identification numbers of almost 2.1 million directors of companies that did not comply with KYC standards, according to a senior official. The director’s identification numbers (DIN), a unique number assigned to people who are eligible to be directors at meetings of registered companies, are being deactivated. They will be reactivated after paying a fee of 5,000 rupees along with the required form and the affected people could also face a lawsuit.

The latest movement of the Ministry of Corporate Affairs also comes at a time when the government has intensified the crackdown on the front companies, which are suspected conduits for illicit cash flows. In June, the ministry decided to carry out the KYC process (Know Your Client) for all directors, including those who have been disqualified.
The last date to comply with the new rules by sending the form ‘DIR-3 KYC‘ without charge ended on September 15. The senior ministry official said that of the 3.3 million active directors, only about 1.21 million directors completed the KYC process. The balance of around 2.1 million people did not meet the requirement.
The process of deactivating the non-conforming DIN is in progress and is likely to be completed on September 17, 2018.
After the deadline of September 15, the MCA 21 system will mark all approved DINs, assigned on or before March 31 of this year, against which the DIR-3 KYC form has not been filed as “deactivated“. The reason for the deactivation would be “no presentation of DIR-3 KYC,” according to the ministry. Interested parties use MCA 21 to submit the required documents to the ministry.
According to another communication from the ministry, which is implementing the Companies Law, the form can be presented “with respect to such deactivated DINs only with a rate of Rs 5,000, without prejudice to any other measure that may be taken”.
Last year, the ministry had disqualified more than 300,000 people from the management of registered companies in the midst of fighting illicit funds flows. These people were directors of companies that did not carry out commercial activities for a long time.

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