Can a nri invest in indian mutual funds as resident?

A complicated situation hence complicated question.

I am trying to help a senior citizen lady. She has Indian PAN card ...aadhar card and other required documents.

She is permanent resident of USA (green card holder) but she does not like to stay in USA..so she goes back to India and come back because by law it is required that green card holders can not stay outside India for more than 6 months...or they cant get citizenship. After being citizen they don't have to come back to USA to maintain citizenship.

So, this lady wants to invest some of her savings in India but she does not want to have NRI account or invest as an NRI because after she becomes citizen (this dec. 2018) she does not want to come back to USA...so she will reside in India permanently after dec. 2018.

In this case if she invests as resident in Indian mutual funds (even though technically she is considered US person at present) what are they consequences ...
if fund house finds out, what can they do ? they will freeze her investment? .she could loose her investment ? .is it a criminal offense?  she could go in to jail ?