CFCI STUDY GUIDE WITH COMPLETE
SOLUTIONS
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 - ANSWER-Internal Fraud and External Fraud
Internal Fraud - ANSWER-which involves the employees of the company against which
the fraud is perpetrated
External Fraud - ANSWER-deceptive conduct by non-employees that
deprives the organization of value, and/or is undertaken for financial gain.
embezzlement - ANSWER-theft or misappropriation of funds placed in one's trust or
belonging to one's employer.
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) - ANSWER-Accounts receivable fraud, this
involves simply stealing cash before it enters the organization's accounting system.
Billing Schemes - ANSWER-Perpetrated by employees who cause their employer to
issue a payment to a false supplier by submitting invoices for fictitious goods or
services, inflated invoices, or invoices for personal purchases.
check tampering - ANSWER-taking advantage of employee access to blank company
checks, using a password to
steal computer-generated checks, or producing counterfeit checks.
Employee reimbursement scheme - ANSWER-making false claims for reimbursement,
or inflating or creating fictitious business expenses. (Travel /meal reimbursement.
corruption - ANSWER-Bribery, illegal gratuities, and/or extortion.
bribery - ANSWER-when something of value is offered or given to influence a business
decision
, Illegal Gratuities - ANSWER-when something of value is given to an employee to
reward a business decision.
Extortion - ANSWER-when a person demands payment or seeks to influence a
business decision by threat of harm through loss of business or personal injury.
Kickback Schemes - ANSWER-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 - ANSWER-the creation, sale, or use of a counterfeit credit card, or the
use of a stolen credit or debit card.
C.N.P - ANSWER-Card not present transactions
identity fraud - ANSWER-involves 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.
identity theft - ANSWER-the fraudulent acquisition or stealing of confidential personal
information.
2 categories that encompass Fraud - ANSWER-Theft (stealing money, ID, or assests)
and deception (cooking the books, lying to shareholders, employees or partners)
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.
Rationalization - ANSWER-persons 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."
Opportunity Element of the triangle - ANSWER-Helps explain the ways in which many
frauds are committed by employees, middle managers, and executives of financial
services organizations. (pg34)
SOLUTIONS
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 - ANSWER-Internal Fraud and External Fraud
Internal Fraud - ANSWER-which involves the employees of the company against which
the fraud is perpetrated
External Fraud - ANSWER-deceptive conduct by non-employees that
deprives the organization of value, and/or is undertaken for financial gain.
embezzlement - ANSWER-theft or misappropriation of funds placed in one's trust or
belonging to one's employer.
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) - ANSWER-Accounts receivable fraud, this
involves simply stealing cash before it enters the organization's accounting system.
Billing Schemes - ANSWER-Perpetrated by employees who cause their employer to
issue a payment to a false supplier by submitting invoices for fictitious goods or
services, inflated invoices, or invoices for personal purchases.
check tampering - ANSWER-taking advantage of employee access to blank company
checks, using a password to
steal computer-generated checks, or producing counterfeit checks.
Employee reimbursement scheme - ANSWER-making false claims for reimbursement,
or inflating or creating fictitious business expenses. (Travel /meal reimbursement.
corruption - ANSWER-Bribery, illegal gratuities, and/or extortion.
bribery - ANSWER-when something of value is offered or given to influence a business
decision
, Illegal Gratuities - ANSWER-when something of value is given to an employee to
reward a business decision.
Extortion - ANSWER-when a person demands payment or seeks to influence a
business decision by threat of harm through loss of business or personal injury.
Kickback Schemes - ANSWER-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 - ANSWER-the creation, sale, or use of a counterfeit credit card, or the
use of a stolen credit or debit card.
C.N.P - ANSWER-Card not present transactions
identity fraud - ANSWER-involves 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.
identity theft - ANSWER-the fraudulent acquisition or stealing of confidential personal
information.
2 categories that encompass Fraud - ANSWER-Theft (stealing money, ID, or assests)
and deception (cooking the books, lying to shareholders, employees or partners)
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.
Rationalization - ANSWER-persons 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."
Opportunity Element of the triangle - ANSWER-Helps explain the ways in which many
frauds are committed by employees, middle managers, and executives of financial
services organizations. (pg34)
