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FIC Act Compliance Anti-Money Laundering
Before Lindiwe may open a business relationship with a new client, the FIC Act requires her firm to carry out customer due diligence (CDD). What is the central purpose of CDD?
RE5 practice question with a worked answer. This is one of hundreds of FSCA RE5 questions in the RegulatoryExams question bank.
- a) To identify and verify who the client (and any beneficial owner) really is, so money-laundering and terror-financing risk can be managed.Correct
- b) To establish the client’s investment objectives and appetite for risk before recommending a product.
- c) To calculate the client’s income-tax liability for submission to SARS.
- d) To build a profile that lets the firm cross-sell additional financial products.
Why this is the answer
CDD (the 'know your customer' duty) is about establishing and verifying identity — including beneficial owners — to keep criminal funds out of the system. Assessing risk appetite/objectives is the FAIS needs analysis, tax is SARS's domain, and marketing is not a lawful purpose of CDD.
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