CFCI STUDY GUIDE – UPDATED
QUESTIONS WITH COMPLETE
SOLUTIONS
Fraud hh- hhANS-"Any hhillegal hhacts hhcharacterized hhby hhdeceit, hhconcealment, hhor
hhviolation hhof hhtrust. hhThese hhacts hhare hhnot hhdependent hhupon hhthe hhperpetrated
hhby hhindividuals hhand hhorganizations hhto hhobtain hhmoney, hhproperty, hhor hhservices;
hhto hhavoid hhpayment hhor hhloss hhof hhservices; hhor hhto hhsecure hhpersonal hhor
hhbusiness hhad-vantage."
Main hhtypes hhof hhfraud hh- hhANS-Internal hhFraud hhand hhExternal hhFraud
Internal hhFraud hh- hhANS-Activities hhthat hhmay hhbe hhcriminal, hhcommitted hhwithin hhan
hhorganization, hhtypically hhby hhthe hhemployee hhagainst hhthe hhemployer.
External hhFraud hh- hhANS-Deceptive hhconduct hhby hhnon-employees hhthat
deprives hhthe hhorganization hhof hhvalue, hhand/or hhis hhundertaken hhfor hhfinancial hhgain.
Embezzlement hh- hhANS-The hhtheft hhof hhmoney, hhproperty, hhor hhother hhassets hhof
hhthe hhemployer.
Larceny hh- hhANS-The hhtaking hhaway hhof hhthe hhproperty hhof hhanother, hhwith hhthe
hhintent hhto hhconvert hhit hhto hhhis/her hhown hhuse.
Financial hhFraud hh- hhANS-"Cooking hhthe hhbooks." hhThis hhtype hhof hhfraud hhgenerally
hhrefers hhto hhfalsely hhrepresenting hhthe hhfinancial hhcondition hhof hhthe hhcompany, hhso
hhas hhto hhinflate hhthe hhvalue hhof hhstock, hhfraudulently hhboost hhexecutive hhbonuses,
hhor hhotherwise hhmislead hhshareholders, hhlenders, hhemployees, hhinvestment
hhanalysts, hhor hhother hhusers hhof hhthe hhinformation.
Skimming hh(cash hhlarceny) hh- hhANS-Accounts hhreceivable hhfraud, hhthis hhinvolves
hhsimply hhstealing hhcash hhbefore hhit hhenters hhthe hhorganization's hhaccounting
hhsystem.
Billing hhSchemes hh- hhANS-Using hhfalse hhdocumentation hhto hhcause hha hhtargeted
hhorganization hhto hhissue hha hhpayment hhfor hhfalse hhservices hhand/or hhpurchases.
,Check hhTampering hh- hhANS-Common hhmethod hh(Taking hhadvantage hhof hhemployee
hhaccess hhto hhblank hhcompany hhchecks, hhusing hha hhpassword hhto
steal hhcomputer-generated hhchecks hhor hhproducing hhcounterfeit hhchecks).
Employee hhreimbursement hhscheme hh- hhANS-Making hhfalse hhclaims hhfor
hhreimbursement hhor hhinflating hhor hhcreating hhfictitious hhbusiness hhexpenses. hh(Travel
hh/meal hhreimbursement.
Corruption hh- hhANS-Bribery, hhillegal hhgratuities, hhand/or hhextortion.
Bribery hh- hhANS-When hhsomething hhof hhvalue hhis hhoffered hhor hhgiven hhto hhinfluence
hha hhbusiness hhdecision.
Illegal hhGratuities hh- hhANS-When hhsomething hhof hhvalue hhis hhgiven hhto hhan
hhemployee hhto hhreward hha hhbusiness hhdecision.
Extortion hh- hhANS-When hha hhperson hhdemands hhpayment hhor hhseeks hhto hhinfluence
hha hhbusiness hhdecision hhby hhthreat hhof hhharm hhthrough hhloss hhof hhbusiness hhor
hhpersonal hhinjury.
Kickback hhSchemes hh- hhANS-Forms hhof hhcorruption hhinvolving hhemployees hhand
hhvendors, hhoften hhusing hhinflated hhbilling hhor hhinvoices hhfor hhwhich hhthe hhemployee
hhis hhpaid hha hhportion hhof hhthe hhinflated hhor hhfictitious hhinvoice.
Credit hhCard hhFraud hh- hhANS-The hhcreation, hhsale, hhor hhuse hhof hha hhcounterfeit
hhcredit hhcard, hhor hhthe hhuse hhof hha hhstolen hhcredit hhor hhdebit hhcard.
C.N.P hh- hhANS-Card hhnot hhpresent hhtransactions
Identity hhTheft hh- hhANS-The hhfraudulent hhacquisition hhor hhstealing hhof hhconfidential
hhpersonal hhinformation hhthrough hhsocial hhengineering.
Identity hhFraud hh- hhANS-Involves hhthe hhunauthorized hhuse hhof hhanother hhperson's
hhpersonal hhdata hhfor hhillegal hhfinancial hhbenefit. hhInvolves hhabusing hhthe hhstolen
hhinformation hhto hhtransact hhpersonal hhbusiness hhin hhthe hhvictim's hhname.
Wildcat hhBanking hh- hhANS-An hhextreme hhform hhof hhwhat hhwas hhcalled hhfree
hhbanking. hh"A hhbank hhthat hhissued hhnotes hhwithout hhadequate hhsecurity hhin hhthe
hhperiod hhbefore hhthe hhestablishment hhof hhthe hhnational hhbanking hhsystem hhin
hh1864".
2 hhcategories hhthat hhencompass hhFraud hh- hhANS-Theft hh(stealing hhmoney, hhID, hhor
hhassets) hhand hhdeception hh(cooking hhthe hhbooks, hhlying hhto hhshareholders,
hhemployees hhor hhpartners)
, Savings hhand hhLoan hhCrisis hh- hhANS-The hhfailure hhof hhabout hh1000 hhsavings hhand
hhloan hhbanks hhas hha hhresult hhof hhrisky hhbusiness hhpractices. hhThe hhroots hhof hhthe
hhS&L hhcrisis hhlay hhin hhexcessive hhlending, hhspeculation, hhand hhrisk-taking hhdriven
hhby hhthe hhmoral hhhazard hhcreated hhby hhderegulation hhand hhtaxpayer hhbailout
hhguarantees.
Myth hh#1 hhof hhthe hhFinancial hhServices hh- hhANS-"We hhhave hhvery hhlittle hhfraud
hhhere" hhex: hhsubprime hhmortgage hhfraud
Myth hh#2 hhof hhFinancial hhServices hh- hhANS-"Ethics hhand hhtraining hhcompliance hhhas
hhus hhcovered" hhFraud hhis hhnot hhalways hhcovered hhin hhethics hhpolicy hhor hhtraining.
Myth hh#3 hhof hhFinancial hhServices hh- hhANS-"Fraud hhis hhan hhunavoidable hhcost hhof
hhdoing hhbusiness" hhFraud hhis hhusually hhnot hhserious hhenough hhto hhdestroy hha
hhfinancial hhservice hhfirm, hhit hhis hhmuch hhmore hhthan hhnecessary hhcost hhof hhdoing
hhbusiness.
Chapter hh1 hhreview hhpoints hh- hhANS-• hhStatistical hhpicture hhof hhfraud. hhThe
hhnumbers hhdo hhnot hhlie: hhFraud hhis hha hhhuge hhworldwide hhproblem—for hhall
hhorganizations. hh
• hhFinancial hhservices hhfraud. hhSeventy-four hhpercent hhof hhfinancial hhinstitutions
hhexperienced hhattempted hhpayment hhfraud hh(check hhfraud, hhACH hhfraud, hhor hhcredit
hhcard hhfraud hhin hh2020). hh
• hhDefinitions hhof hhfraud. hhThe hhbroad hhdefinition hhof hhfraud hhis hhillegal hhactivity
hhrepresenting hheither hhtheft hhor hhdeception, hhor hha hhcombination hhof hhboth. hh
• hhMyths hhabout hhfraud. hhIt hhis hheasy hhto hhbecome hhcomplacent hhabout hhfraud hhbut
hhdoing hhso hhcan hhbe hhvery hhcostly. hhFraud hhdoes hhoccur hhin hhevery hhorganization
hhand hhis hhpotentially hhserious hhenough hhto hhcause hhmajor hhlong-term hhdamage. hh
• hhMain hhtypes hhof hhfraud. hhCountless hhvarieties hhof hhfraud hhthreaten hhfinancial
hhinstitutions. hhFraudsters hhare hhconstantly hhthinking hhup hhnew hhways hhto hhtarget
hhfinancial hhservices hhinstitutions.
20-60-20 hhrule hhof hhhuman hhcomponent hhof hhfraud hh- hhANS-20% hhof hhpeople hhwill
hhnever hhcommit hhfraud
60% hhare hhfence hhsitters hhand hhmay hhcommit hhfraud hhif hhgiven hhthe hhopportunity
20% hhof hhpeople hhare hhinherently hhdishonest
2 hhtypes hhof hhinsider hhfraud hhthreat hh- hhANS-Employee hhlevel hhfraud hhand
hhmanagement hhlevel hhfraud
True hhor hhFalse: hhManagment hhLevel hhFraud hhis hhcommitted hhless hhfrequently hhthan
hhemployee hhlevel hhfraud? hh- hhANS-True: hhManagement hhlevel hhfraud hhis hhcommitted
hhless hhfrequently hhthan hhemployee hhlevel hhfraud hhhowever hhthe hhfinancial hhloss hhis
hhalmost hhalways hhgreater.
QUESTIONS WITH COMPLETE
SOLUTIONS
Fraud hh- hhANS-"Any hhillegal hhacts hhcharacterized hhby hhdeceit, hhconcealment, hhor
hhviolation hhof hhtrust. hhThese hhacts hhare hhnot hhdependent hhupon hhthe hhperpetrated
hhby hhindividuals hhand hhorganizations hhto hhobtain hhmoney, hhproperty, hhor hhservices;
hhto hhavoid hhpayment hhor hhloss hhof hhservices; hhor hhto hhsecure hhpersonal hhor
hhbusiness hhad-vantage."
Main hhtypes hhof hhfraud hh- hhANS-Internal hhFraud hhand hhExternal hhFraud
Internal hhFraud hh- hhANS-Activities hhthat hhmay hhbe hhcriminal, hhcommitted hhwithin hhan
hhorganization, hhtypically hhby hhthe hhemployee hhagainst hhthe hhemployer.
External hhFraud hh- hhANS-Deceptive hhconduct hhby hhnon-employees hhthat
deprives hhthe hhorganization hhof hhvalue, hhand/or hhis hhundertaken hhfor hhfinancial hhgain.
Embezzlement hh- hhANS-The hhtheft hhof hhmoney, hhproperty, hhor hhother hhassets hhof
hhthe hhemployer.
Larceny hh- hhANS-The hhtaking hhaway hhof hhthe hhproperty hhof hhanother, hhwith hhthe
hhintent hhto hhconvert hhit hhto hhhis/her hhown hhuse.
Financial hhFraud hh- hhANS-"Cooking hhthe hhbooks." hhThis hhtype hhof hhfraud hhgenerally
hhrefers hhto hhfalsely hhrepresenting hhthe hhfinancial hhcondition hhof hhthe hhcompany, hhso
hhas hhto hhinflate hhthe hhvalue hhof hhstock, hhfraudulently hhboost hhexecutive hhbonuses,
hhor hhotherwise hhmislead hhshareholders, hhlenders, hhemployees, hhinvestment
hhanalysts, hhor hhother hhusers hhof hhthe hhinformation.
Skimming hh(cash hhlarceny) hh- hhANS-Accounts hhreceivable hhfraud, hhthis hhinvolves
hhsimply hhstealing hhcash hhbefore hhit hhenters hhthe hhorganization's hhaccounting
hhsystem.
Billing hhSchemes hh- hhANS-Using hhfalse hhdocumentation hhto hhcause hha hhtargeted
hhorganization hhto hhissue hha hhpayment hhfor hhfalse hhservices hhand/or hhpurchases.
,Check hhTampering hh- hhANS-Common hhmethod hh(Taking hhadvantage hhof hhemployee
hhaccess hhto hhblank hhcompany hhchecks, hhusing hha hhpassword hhto
steal hhcomputer-generated hhchecks hhor hhproducing hhcounterfeit hhchecks).
Employee hhreimbursement hhscheme hh- hhANS-Making hhfalse hhclaims hhfor
hhreimbursement hhor hhinflating hhor hhcreating hhfictitious hhbusiness hhexpenses. hh(Travel
hh/meal hhreimbursement.
Corruption hh- hhANS-Bribery, hhillegal hhgratuities, hhand/or hhextortion.
Bribery hh- hhANS-When hhsomething hhof hhvalue hhis hhoffered hhor hhgiven hhto hhinfluence
hha hhbusiness hhdecision.
Illegal hhGratuities hh- hhANS-When hhsomething hhof hhvalue hhis hhgiven hhto hhan
hhemployee hhto hhreward hha hhbusiness hhdecision.
Extortion hh- hhANS-When hha hhperson hhdemands hhpayment hhor hhseeks hhto hhinfluence
hha hhbusiness hhdecision hhby hhthreat hhof hhharm hhthrough hhloss hhof hhbusiness hhor
hhpersonal hhinjury.
Kickback hhSchemes hh- hhANS-Forms hhof hhcorruption hhinvolving hhemployees hhand
hhvendors, hhoften hhusing hhinflated hhbilling hhor hhinvoices hhfor hhwhich hhthe hhemployee
hhis hhpaid hha hhportion hhof hhthe hhinflated hhor hhfictitious hhinvoice.
Credit hhCard hhFraud hh- hhANS-The hhcreation, hhsale, hhor hhuse hhof hha hhcounterfeit
hhcredit hhcard, hhor hhthe hhuse hhof hha hhstolen hhcredit hhor hhdebit hhcard.
C.N.P hh- hhANS-Card hhnot hhpresent hhtransactions
Identity hhTheft hh- hhANS-The hhfraudulent hhacquisition hhor hhstealing hhof hhconfidential
hhpersonal hhinformation hhthrough hhsocial hhengineering.
Identity hhFraud hh- hhANS-Involves hhthe hhunauthorized hhuse hhof hhanother hhperson's
hhpersonal hhdata hhfor hhillegal hhfinancial hhbenefit. hhInvolves hhabusing hhthe hhstolen
hhinformation hhto hhtransact hhpersonal hhbusiness hhin hhthe hhvictim's hhname.
Wildcat hhBanking hh- hhANS-An hhextreme hhform hhof hhwhat hhwas hhcalled hhfree
hhbanking. hh"A hhbank hhthat hhissued hhnotes hhwithout hhadequate hhsecurity hhin hhthe
hhperiod hhbefore hhthe hhestablishment hhof hhthe hhnational hhbanking hhsystem hhin
hh1864".
2 hhcategories hhthat hhencompass hhFraud hh- hhANS-Theft hh(stealing hhmoney, hhID, hhor
hhassets) hhand hhdeception hh(cooking hhthe hhbooks, hhlying hhto hhshareholders,
hhemployees hhor hhpartners)
, Savings hhand hhLoan hhCrisis hh- hhANS-The hhfailure hhof hhabout hh1000 hhsavings hhand
hhloan hhbanks hhas hha hhresult hhof hhrisky hhbusiness hhpractices. hhThe hhroots hhof hhthe
hhS&L hhcrisis hhlay hhin hhexcessive hhlending, hhspeculation, hhand hhrisk-taking hhdriven
hhby hhthe hhmoral hhhazard hhcreated hhby hhderegulation hhand hhtaxpayer hhbailout
hhguarantees.
Myth hh#1 hhof hhthe hhFinancial hhServices hh- hhANS-"We hhhave hhvery hhlittle hhfraud
hhhere" hhex: hhsubprime hhmortgage hhfraud
Myth hh#2 hhof hhFinancial hhServices hh- hhANS-"Ethics hhand hhtraining hhcompliance hhhas
hhus hhcovered" hhFraud hhis hhnot hhalways hhcovered hhin hhethics hhpolicy hhor hhtraining.
Myth hh#3 hhof hhFinancial hhServices hh- hhANS-"Fraud hhis hhan hhunavoidable hhcost hhof
hhdoing hhbusiness" hhFraud hhis hhusually hhnot hhserious hhenough hhto hhdestroy hha
hhfinancial hhservice hhfirm, hhit hhis hhmuch hhmore hhthan hhnecessary hhcost hhof hhdoing
hhbusiness.
Chapter hh1 hhreview hhpoints hh- hhANS-• hhStatistical hhpicture hhof hhfraud. hhThe
hhnumbers hhdo hhnot hhlie: hhFraud hhis hha hhhuge hhworldwide hhproblem—for hhall
hhorganizations. hh
• hhFinancial hhservices hhfraud. hhSeventy-four hhpercent hhof hhfinancial hhinstitutions
hhexperienced hhattempted hhpayment hhfraud hh(check hhfraud, hhACH hhfraud, hhor hhcredit
hhcard hhfraud hhin hh2020). hh
• hhDefinitions hhof hhfraud. hhThe hhbroad hhdefinition hhof hhfraud hhis hhillegal hhactivity
hhrepresenting hheither hhtheft hhor hhdeception, hhor hha hhcombination hhof hhboth. hh
• hhMyths hhabout hhfraud. hhIt hhis hheasy hhto hhbecome hhcomplacent hhabout hhfraud hhbut
hhdoing hhso hhcan hhbe hhvery hhcostly. hhFraud hhdoes hhoccur hhin hhevery hhorganization
hhand hhis hhpotentially hhserious hhenough hhto hhcause hhmajor hhlong-term hhdamage. hh
• hhMain hhtypes hhof hhfraud. hhCountless hhvarieties hhof hhfraud hhthreaten hhfinancial
hhinstitutions. hhFraudsters hhare hhconstantly hhthinking hhup hhnew hhways hhto hhtarget
hhfinancial hhservices hhinstitutions.
20-60-20 hhrule hhof hhhuman hhcomponent hhof hhfraud hh- hhANS-20% hhof hhpeople hhwill
hhnever hhcommit hhfraud
60% hhare hhfence hhsitters hhand hhmay hhcommit hhfraud hhif hhgiven hhthe hhopportunity
20% hhof hhpeople hhare hhinherently hhdishonest
2 hhtypes hhof hhinsider hhfraud hhthreat hh- hhANS-Employee hhlevel hhfraud hhand
hhmanagement hhlevel hhfraud
True hhor hhFalse: hhManagment hhLevel hhFraud hhis hhcommitted hhless hhfrequently hhthan
hhemployee hhlevel hhfraud? hh- hhANS-True: hhManagement hhlevel hhfraud hhis hhcommitted
hhless hhfrequently hhthan hhemployee hhlevel hhfraud hhhowever hhthe hhfinancial hhloss hhis
hhalmost hhalways hhgreater.
