Study guide
12.2 FIC Impact on Representative–Client Interactions
RE5 Regulatory Examination — Representatives South Africa
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1 Introduction & Exam Overview
About the RE5 Exam Exam Format, Pass Mark, Booking & Logistics How to Prepare Using Tasks & Qualifying Criteria
2 Chapter 1: The FAIS Act as a Regulatory Framework
1.1 Purpose of the FAIS Act & Client Protection 1.2 Subordinate Legislation Map 1.3 Key Role-Players under FAIS
3 Chapter 2: Financial Products & Services
2.1 Definition & Types of Financial Products 2.2 Financial Services: Advice vs Intermediary Service 2.3 Applying Product Knowledge in the FAIS Environment
4 Chapter 3: Compliance Officers
3.1 Role & Function of the Compliance Officer 3.2 CO Duties, Approval, Independence & Reporting
5 Chapter 4: Maintaining the FSP Licence
4.1 Requirements to Obtain & Maintain an FSP Licence 4.2 How Representatives Help Maintain the Licence 4.3 Display of Licences & Authorisation Visibility
6 Chapter 5: Licence Risk, Undesirable Practices & Offences
5.1 Suspension, Withdrawal & Lapse of Accreditation 5.2 Undesirable Business Practices 5.3 Authority Remedies if Practices Continue 5.4 Offences under the FAIS Act
7 Chapter 6: Key Individuals
6.1 Roles & Responsibilities of Key Individuals 6.2 KI Management & Oversight Duties 6.3 When a KI Loses Honesty/Integrity — Impact on Representatives
8 Chapter 7: GCOC Duties & Conflicts of Interest
7.1 General & Specific Duties of a Provider 7.2 Identifying & Managing Conflicts of Interest 7.3 Disclosure Rules Framework & Impact on the FSP
9 Chapter 8: Disclosure Duties in Practice
8.1 Disclosures Before Rendering a Financial Service 8.2 Disclosures While Rendering a Financial Service 8.3 Provider, Product Supplier & Service Disclosures 8.4 Fees, Commission & Remuneration Disclosures
10 Chapter 9: Advice Process, Custody & Applying the Code
9.1 The Advice Process, Suitability & Record of Advice 9.2 Custody of Financial Products & Client Funds 9.3 Applying the General Code in Day-to-Day Practice
11 Chapter 10: Internal Complaints & Termination of Agreements
10.1 Internal Complaint Handling under the GCOC 10.2 Following Firm Complaints Procedures as a Representative 10.3 Termination of Client Agreements
12 Chapter 11: Record-Keeping Requirements
11.1 Record-Keeping under the FAIS & FIC Acts 11.2 Creating, Keeping & Retrieving Records Correctly
13 Chapter 12: FIC Act & Anti-Money Laundering Duties
12.1 FIC Act Requirements that Apply to FSPs 12.2 FIC Impact on Representative–Client Interactions
14 Chapter 13: The FAIS Ombud
13.1 Role & Authority of the FAIS Ombud 13.2 Ombud Process, Jurisdiction & Outcomes
15 Chapter 14: Representatives & Fit and Proper Requirements
14.1 Roles & Responsibilities of Representatives 14.2 Honesty, Competence, Experience, RE & CPD 14.3 Distinguishing Advice from Intermediary Services
16 Chapter 15: Register of Representatives, Supervision & Losing Fit and Proper
15.1 Purpose & Requirements of the Register of Representatives 15.2 When a Representative Must Work under Supervision 15.3 Disclosure Duties while under Supervision 15.4 Implications if a Representative No Longer Meets Fit and Proper
17 Chapter 16: Debarment of Representatives
16.1 Purpose of Debarment & When It Applies 16.2 Debarment Process & FSCA Notification 16.3 Recourse for a Debarred Representative
12.2 FIC Impact on Representative–Client Interactions
Key Takeaways Explain This Topic AI
Representatives may not skip customer due diligence to close a sale; CDD sequencing comes before full relationship/product activation where the Act and RMCP require it
Section 21/21A-type themes require prescribed particulars such as full names, identity numbers (or accepted identifiers), and residential address verification for natural persons, plus ownership/control themes for entities
Higher-risk clients and situations demand enhanced due diligence and higher-level approval — not VIP waivers invented on the sales floor
Escalate red flags, incomplete high-risk files, third-party payment concerns and structuring patterns to the MLRO/compliance function without tipping off the client
Classic RE5 scenarios include ID refusal, third-party funding without explanation, and cash structuring to avoid threshold reporting
Last updated: August 2026
12.2 FIC Impact on Representative–Client Interactions
Quick Answer: At the client interface, FIC duties mean a representative may not skip customer due diligence to close a sale . You must collect and process prescribed identification and verification particulars (section 21 / 21A themes — full names, identity numbers, and residential address verification themes for natural persons, plus ownership/control themes for entities), apply enhanced due diligence where risk is higher, and escalate red flags to the Money Laundering Reporting Officer / compliance function. Client refusal, third-party payments, and cash structuring are classic exam scenarios.
Task 6 becomes real when a client is sitting across the desk (or on a video call) and wants the product today . RE5 tests whether you protect the FSP’s accountable-institution duties under commercial pressure.
The non-negotiable sequencing rule
Firm sales culture sometimes rewards speed. FIC culture rewards control before commitment . In exam-correct practice:
Engage the client and explain why identity verification is required (lawful firm process — not a personal distrust drama);
- Collect prescribed CDD information and documents into the approved system ;
- Complete verification steps (or staged steps the RMCP expressly allows);
- Apply risk rating and any EDD;
Only then proceed with product application / advice implementation that establishes the relationship or single transaction as defined in firm procedure.
If step 2–4 are incomplete, do not pretend the relationship is fully opened “and FICA can follow later” unless the RMCP and law provide a specific, controlled exception — and even then you follow the exception as written , not as a sales loophole.
Prescribed particulars — section 21 / 21A themes
RE5 expects practical familiarity with what “identify and verify” looks like for common client types. Study materials commonly map natural-person themes as follows (always apply your FSP’s current RMCP forms):
- Element Why it matters
- Full names Establishes legal identity of the person you are dealing with
Identity number (or passport/asylum/other accepted identifier themes) Links the person to a unique official identity
Residential address verification themes Supports location risk assessment and helps detect front arrangements
Contact and occupation/source themes (as required by RMCP) Builds a coherent client profile for ongoing monitoring
For juristic clients: registration details, directors/members, beneficial owners / controllers Prevents anonymous corporate shells
Verification uses reliable, independent sources — typically original or certified identity documents, trusted electronic verification where the RMCP allows, and address corroboration methods approved by the firm. A representative who accepts a blurry WhatsApp selfie of a friend holding someone else’s ID is not performing CDD; they are performing theatre.
What you may tell the client
Frame CDD as a legal and safety requirement for regulated financial services:
“We are required by law and our licence conditions to verify who our clients are before we open or continue certain relationships.”
- “These checks protect clients and the financial system from fraud and crime.”
- “I cannot complete the application until the firm’s verification steps are done.”
- Do not say: “It’s just red tape — we can ignore it if you invest enough.”
- Enhanced due diligence (EDD) for higher risk
Standard CDD is the baseline. Enhanced due diligence applies when risk indicators rise. Examples of themes that often trigger deeper work (exact lists live in the RMCP):
- Prominent influential person / politically exposed person-type connections;
- Unusual complexity of ownership or use of multiple intermediaries without clear economic purpose;
- Geographic or product risk that elevates ML/TF exposure;
- Inconsistent explanations of source of funds or source of wealth relative to the product size;
Reluctance to provide basic information without a credible reason.
EDD typically means more information, more corroboration, higher-level approval, and closer monitoring — not a polite smile and the same thin file. Representatives escalate for EDD decisions; they do not self-approve “special VIP waivers.”
Escalation to the MLRO / compliance function
Know the internal path:
Situation Representative action
Incomplete documents but cooperative client Pause onboarding; guide client to supply missing items; log attempts
Client refuses identity verification Do not proceed with relationship/transaction that requires CDD; escalate per RMCP
- Suspicion of ML/TF or unusual activity Escalate internally immediately with facts; do not tip off the client
- Cash near/above threshold patterns Follow CTR process and escalate aggregation/structuring concerns
Pressure from manager to skip FICA Refuse the skip; escalate governance concern — FAIS honesty/integrity themes also bite
Tipping-off themes: once a suspicious matter is under consideration or reported, alerting the client in a way that prejudices investigation is a serious compliance failure. Practical rule: discuss process requirements openly; do not announce “I am reporting you as a money launderer.”
- Scenario set for RE5 application
- Scenario A — Client refuses ID
Facts: A prospective client wants a large lump-sum investment. They provide a cell number and email but refuse to show any identity document, saying “I value privacy and only deal in cash introductions.”
Correct response: Explain that prescribed CDD is mandatory for accountable institutions. Without identification and verification, the FSP cannot lawfully complete onboarding that requires CDD. Do not open the relationship on a handshake. Escalate if the refusal itself raises suspicion (for example aggressive secrecy combined with urgency and third-party funding).
Wrong response: Accept the money “temporarily” in a personal account, or use a relative’s FICA pack “just for now.”
Scenario B — Third-party payments
Facts: Mrs D completes CDD in her own name. Funding for the investment arrives from Mr X, who is not on the application and who refuses to explain the relationship. Mrs D says “He’s helping me; don’t ask questions.”
Analysis: Third-party payments are classic red-flag and CDD-refresh moments. The FSP must understand who is paying , why , and whether Mr X should be identified/verified under RMCP rules (beneficial ownership, person acting on behalf of another, source of funds). Proceeding blindly treats the named client as a possible front . Escalate to compliance before product activation if explanations and documents are inadequate.
Scenario C — Structuring cash
Facts: A client proposes to deposit just-under-threshold cash amounts on consecutive days for the same product, joking that “we all know how to stay under the radar of cash reports.”
Analysis: This is textbook structuring risk — designing transactions to avoid cash threshold reporting. It is a strong STR-type escalation indicator even if each individual cash movement sits below a published threshold. The representative must not coach the client on how to avoid CTR. Follow firm cash-handling rules, escalate the pattern, and refuse to participate in evasion.
Everyday behaviours that keep you exam-safe
Use only firm-approved FICA checklists and systems — side spreadsheets invite gaps.
Never borrow another client’s documents to “speed up” a different client.
Refresh CDD when the client’s profile or transaction behaviour changes materially.
Document what was requested, received, and still outstanding — contemporaneous notes protect you in audits.
Align with FAIS honesty and GCOC fairness : rushing a client past FICA is neither honest nor fair.
Treat internal escalation as professional duty , not disloyalty to a sales buddy.
Interaction with advice and product duties
FIC does not replace suitability analysis. After CDD clears:
- You still must meet FAIS advice and disclosure standards where advice is given;
- You still must stay within product categories of your appointment;
You still must keep FAIS records of advice and FIC records as separate but coexisting obligations.
A clean FICA pack on an unsuitable product is still a FAIS problem. An unsuitable-advice refusal does not excuse missing FICA if the relationship otherwise required CDD.
Scenario D — Sales pressure at month-end
Facts: A key individual pushes the team to submit incomplete FICA files so that production targets are met, promising “compliance will regularise on Monday.”
Analysis: Production pressure is not a legal defence. Representatives who knowingly submit incomplete verification contrary to the RMCP expose themselves to disciplinary outcomes and, in serious honesty cases, debarment risk themes under FAIS. The correct conduct is to complete CDD, escalate the instruction if it is unlawful/non-compliant, and protect the licence.
Exam traps for section 12.2
“Close the sale first; FICA is admin.” Sequencing is CDD-first for relationships that require it.
“Client privacy always outweighs ID checks.” Privacy is respected through secure handling — not by skipping identification.
“Third-party payers need no questions.” Source of funds and third-party identity themes matter.
“Helping a client structure under the cash threshold is good service.” It is a red flag and potential offence pathway — escalate, do not coach evasion.
“Only the compliance officer ever speaks to clients about FICA.” Representatives perform front-line collection and explanation; compliance owns reporting decisions and complex EDD approvals.
- Mini checklist before you leave a client meeting
- Full names and identity particulars captured as required
- Verification documents collected/uploaded to the approved system
- Address and entity ownership themes completed where applicable
- Risk indicators considered; EDD escalated if needed
- Third-party funding explained and documented or escalated
- No tip-off language used if suspicion exists
- FAIS advice/disclosure steps still planned — FICA success ≠ advice success
Master this section as front-line discipline : prescribed particulars, no-skip rule, EDD, escalation, and scenario judgment on refusal, third parties, and cash structuring. Together with 12.1’s firm map, you can answer Task 6 questions as a representative who protects both the client relationship and the financial system.