EPFO issues new rules for inoperative, inactive accounts to combat fraud

An EPF account becomes inoperative after 58 years, or 36 months, after a subscriber's retirement age of 55 years

The Employees Provident Fund Organisation (EPFO) has released new guidelines to tighten controls over inactive and inoperative accounts in a bid to prevent fraud and unauthorised withdrawals. A new standard operating procedure (SOP), issued on August 2, outlines stricter verification processes and additional layers of scrutiny for accounts that have had no transactions for long.
 

Under the revised rules, EPF accounts with no credits or debits (except interest) for a specified duration will be classified as ‘transaction-less accounts'. Additionally, accounts meeting the existing criteria under Para 72(6) of the EPF Scheme will continue to be designated as ‘inoperative accounts'. Both categories will face enhanced verification before withdrawals or transfers are allowed.
 

A key change is the mandatory generation of Universal Account Numbers (UANs) for all dormant accounts. Members with transaction-less or inoperative accounts lacking UANs will need to visit EPFO offices or special camps for biometric verification and photo capture before a UAN can be created. This step aims to confirm the identity of claimants and prevent impersonation.

 

For accounts already linked to UANs but lacking proper Know Your Customer (KYC) details, members must complete KYC seeding either through their employers or directly with EPFO offices. The authorities for approving UAN generation and KYC updates will vary based on the account balance, with higher-value accounts requiring senior officer clearance.

 

A significant change is the introduction of a comprehensive verification process to unblock frozen accounts. This includes checks of digital and physical records, employer verification, and a ‘crowdsourcing’ approach (It will be similar to having a digital Panchnama or witness validation through known or identifiable people). Under this system, the EPFO will send verification requests to 20 active UAN holders who worked at the same establishment during the same period as the claimant. Confirmation from at least five such members will be required as an additional identity check.

 

The SOP also establishes a systematical approval system for unblocking requests and subsequent claim settlements. Claims from previously inactive accounts will now undergo an extra layer of scrutiny, with approval levels determined by the claim amount. For instance, claims above Rs 25 lakhs will require clearance up to the Officer-in-Charge level.

 

According to the EPFO circular, the unblocking of such EPF accounts can take up to 20-25 days from the date of submission, depending on the type of account and verification process required.

 

The new guidelines also address special cases, such as claims by nominees or legal heirs of deceased members. These will require additional documentation and verification steps to protect against fraudulent claims.

 

To monitor compliance, the EPFO is developing comprehensive dashboards for tracking UAN generation, KYC seeding, unblocking requests, and claim settlements across all levels - from regional offices to the head office. Regular audits and reviews are mandated at various levels to ensure adherence to the new procedures.

 

Experts suggest these changes come in response to increasing instances of fraud attempts targeting dormant EPF accounts. By implementing stricter controls and leveraging technology, the EPFO hopes to safeguard workers' retirement savings while maintaining efficient service delivery. As the new system rolls out, both employers and employees will need to familiarise themselves with the updated requirements to ensure smooth processing of claims from long-inactive accounts.