LATEST 2024 CFCI EXAM STUDY GUIDE (A NEW
UPDATED VERSION) ACTUAL QUESTIONS AND
CORRECT VERIFIED ANSWERS (REVISED)
|ALREADY GRADED A+ (BRAND NEW!!)
Fraud - ANSWER"Any illegal acts characterized by deceit, concealment, or violation of
trust. These acts are not dependent upon the perpetrated by individuals and
organizations to obtain money, property, or services; to avoid payment or loss of
services; or to secure personal or business ad-vantage."
Main types of fraud - ANSWERInternal Fraud and External Fraud
Internal Fraud - ANSWERActivities that may be criminal, committed within an
organization, typically by the employee against the employer.
External Fraud - ANSWERDeceptive conduct by non-employees that
deprives the organization of value, and/or is undertaken for financial gain.
Embezzlement - ANSWERThe theft of money, property, or other assets of the employer.
Larceny - ANSWERThe taking away of the property of another, with the intent to convert
it to his/her own use.
Financial Fraud - ANSWER"Cooking the books." This type of fraud generally refers to
falsely representing the financial condition of the company, so as to inflate the value of
stock, fraudulently boost executive bonuses, or otherwise mislead shareholders,
lenders, employees, investment analysts, or other users of the information.
Skimming (cash larceny) - ANSWERAccounts receivable fraud, this involves simply
stealing cash before it enters the organization's accounting system.
Billing Schemes - ANSWERUsing false documentation to cause a targeted organization
to issue a payment for false services and/or purchases.
Check Tampering - ANSWERCommon method (Taking advantage of employee access to
blank company checks, using a password to
steal computer-generated checks or producing counterfeit checks).
,Employee reimbursement scheme - ANSWERMaking false claims for reimbursement or
inflating or creating fictitious business expenses. (Travel /meal reimbursement.
Corruption - ANSWERBribery, illegal gratuities, and/or extortion.
Bribery - ANSWERWhen something of value is offered or given to influence a business
decision.
Illegal Gratuities - ANSWERWhen something of value is given to an employee to reward a
business decision.
Extortion - ANSWERWhen a person demands payment or seeks to influence a business
decision by threat of harm through loss of business or personal injury.
Kickback Schemes - ANSWERForms of corruption involving employees and vendors,
often using inflated billing or invoices for which the employee is paid a portion of the
inflated or fictitious invoice.
Credit Card Fraud - ANSWERThe creation, sale, or use of a counterfeit credit card, or the
use of a stolen credit or debit card.
C.N.P - ANSWERCard not present transactions
Identity Theft - ANSWERThe fraudulent acquisition or stealing of confidential personal
information through social engineering.
Identity Fraud - ANSWERInvolves the unauthorized use of another person's personal
data for illegal financial benefit. Involves abusing the stolen information to transact
personal business in the victim's name.
Wildcat Banking - ANSWERAn extreme form of what was called free banking. "A bank
that issued notes without adequate security in the period before the establishment of the
national banking system in 1864".
2 categories that encompass Fraud - ANSWERTheft (stealing money, ID, or assets) and
deception (cooking the books, lying to shareholders, employees or partners)
Savings and Loan Crisis - ANSWERThe failure of about 1000 savings and loan banks as a
result of risky business practices. The roots of the S&L crisis lay in excessive lending,
speculation, and risk-taking driven by the moral hazard created by deregulation and
taxpayer bailout guarantees.
Myth #1 of the Financial Services - ANSWER"We have very little fraud here" ex: subprime
mortgage fraud
Myth #2 of Financial Services - ANSWER"Ethics and training compliance has us
covered" Fraud is not always covered in ethics policy or training.
Myth #3 of Financial Services - ANSWER"Fraud is an unavoidable cost of doing
business" Fraud is usually not serious enough to destroy a financial service firm, it is
much more than necessary cost of doing business.
, Chapter 1 review points - ANSWER• Statistical picture of fraud. The numbers do not lie:
Fraud is a huge worldwide problem—for all organizations.
• Financial services fraud. Seventy-four percent of financial institutions experienced
attempted payment fraud (check fraud, ACH fraud, or credit card fraud in 2020).
• Definitions of fraud. The broad definition of fraud is illegal activity representing either
theft or deception, or a combination of both.
• Myths about fraud. It is easy to become complacent about fraud but doing so can be
very costly. Fraud does occur in every organization and is potentially serious enough to
cause major long-term damage.
• Main types of fraud. Countless varieties of fraud threaten financial institutions.
Fraudsters are constantly thinking up new ways to target financial services institutions.
20-60-20 rule of human component of fraud - ANSWER20% of people will never commit
fraud
60% are fence sitters and may commit fraud if given the opportunity
20% of people are inherently dishonest
2 types of insider fraud threat - ANSWEREmployee level fraud and management level
fraud
True or False: Managment Level Fraud is committed less frequently than employee level
fraud? - ANSWERTrue: Management level fraud is committed less frequently than
employee level fraud however the financial loss is almost always greater.
Fraud Triangle - ANSWERCreated by leading criminologist Donald Cressey. The three
factors that contribute to fraudulent activity by employees: opportunity, financial
pressure, and rationalization.
Financial pressure - ANSWERFinancial difficulties, such as large amounts of credit card
debt, an overwhelming burden of unpaid medical bills, large gambling debts, extended
unemployment, or similar financial difficulties.
Opportunity - ANSWEREmployee identifies a weakness in the organization's anti-fraud
controls. For example, if an employee is able to set up a phony vendor, have fraudulent
invoices approved, and have payment sent to an address that he or she controls.
Rationalization - ANSWERPersons who have committed fraud convince themselves that
the act is either not wrong or that even though it may be wrong, it will be corrected
because they will eventually return the money. Another, often more damaging form of
rationalization occurs when employees justify the fraud by taking the attitude that they
deserve the stolen money—because the company unfairly denied them a raise or
promotion, or because some other form of mistreatment made them "victims."
Remember: - ANSWERThe opportunity element of the Fraud Triangle helps to explain the
ways in which many frauds are committed by employees, middle managers, and
executives of financial services organizations.
What caused the Fraud Triangle to morph into the Fraud Diamond? - ANSWERA
reevaluation for peoples unadorned lust for money caused personal Greed to become
the 4th side, morphing the triangle into the diamond.
