Mutual fund investors are still smarting over their New Year gift, in the form of immobilised accounts pending the acquisition of MIN numbers. A flurry of angry emails have questioned the need for separate Mutual Fund Identification Numbers (MIN) when PAN numbers (issued by the Tax Department) are already mandatory and banks have recently forced every account holder to ensure strict compliance with Know Your Customer (KYC) rules for bank accounts as well as Depository Accounts.

The Association of Mutual Funds of India (AMFI), which is issuing the MIN numbers, is the butt of investors’ fury. Some question AMFI’s authority to issue numbers, but most of the anger is directed at the government for repeatedly burdening the tax-paying and law-abiding people with a mindless increase in paperwork, especially when there is no sign of any reduction in the cash economy.

But AMFI is not to blame; in fact it has worked at reducing the pain of compliance. AMFI chairman A.P. Kurien explains that the Money Laundering Act obligated Asset Management Companies (AMCs) of all mutual funds to follow “enhanced Know Your Client (KYC) requirements” from January 1, 2007. AMFI made representations to the government pointing out that mutual fund investment is routed through the banking system, which already enforces KYC verification while opening accounts. But it was told that each AMC had no option but to implement ‘enhanced KYC’ regulation because it was “the law of the land”.

Clearly, those who drafted the Money Laundering laws did not bother to examine it for repetitive and meaningless paper work that it would generate or the additional costs imposed on the mutual fund industry. Why bother to ask various government departments to share information or create a structure for such sharing when it is far easier to order investors to stand in queues and submit the information all over again under threat of freezing their accounts?

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