CFCI STUDY GUIDE
ACTUAL EXAM
1. Which of the following is most commonly associated with a Ponzi scheme?
A. Use of falsified vendor invoices
B. Return of investment from new investors
C. Bribery of government officials
D. Overstating revenue in financial statements
✅ Answer: B. Return of investment from new investors
Explanation: Ponzi schemes pay returns to earlier investors using the capital from
new investors, rather than legitimate profits.
2. The Bank Secrecy Act (BSA) requires financial institutions to report cash
transactions over what threshold?
A. $1,000
B. $3,000
C. $5,000
D. $10,000
✅ Answer: D. $10,000
Explanation: Institutions must file a Currency Transaction Report (CTR) for cash
transactions over $10,000.
3. Which red flag may indicate potential trade-based money laundering?
A. Payment in advance for low-risk shipments
,B. Pricing inconsistent with market rates
C. Delay in shipping documentation
D. Use of reputable logistics firms
✅ Answer: B. Pricing inconsistent with market rates
Explanation: Over/under invoicing and misrepresentation of price or quantity are
indicators of trade-based money laundering.
4. Which financial crime is MOST likely when an employee creates fake vendors and
submits invoices for payment?
A. Embezzlement
B. Larceny
C. Fraudulent disbursement
D. Skimming
✅ Answer: C. Fraudulent disbursement
Explanation: This involves unauthorized use of company funds through fake vendors
or false billing.
5. In forensic accounting, what does "Benford’s Law" help detect?
A. Hidden offshore accounts
B. Bribery payments
C. Anomalies in numeric data
D. Identity theft
✅ Answer: C. Anomalies in numeric data
Explanation: Benford’s Law is used to identify fraudulent numbers by analyzing the
frequency distribution of digits.
6. Which regulation requires customer due diligence for new accounts?
A. Sarbanes-Oxley Act
B. USA PATRIOT Act
,C. Gramm-Leach-Bliley Act
D. RICO Act
✅ Answer: B. USA PATRIOT Act
Explanation: The act mandates that institutions verify identities of individuals
opening new accounts (KYC).
7. What is the first phase in the money laundering cycle?
A. Integration
B. Structuring
C. Placement
D. Layering
✅ Answer: C. Placement
Explanation: Placement involves introducing illegal funds into the financial system.
8. Which investigative technique is most effective for tracing complex transaction
paths?
A. Digital surveillance
B. Data mining
C. Link analysis
D. Eyewitness testimony
✅ Answer: C. Link analysis
Explanation: Link analysis maps connections between people, entities, and
transactions.
9. What is the primary goal of a Suspicious Activity Report (SAR)?
A. To recover stolen funds
B. To report non-compliance to shareholders
C. To alert financial regulators of suspicious behavior
D. To notify customers of unusual activity
, ✅ Answer: C. To alert financial regulators of suspicious behavior
Explanation: SARs help law enforcement identify and investigate potential financial
crimes.
10. Which is considered a key ethical responsibility of financial crimes investigators?
A. Maximizing organizational profit
B. Ensuring prosecution at all costs
C. Maintaining impartiality and confidentiality
D. Reporting to shareholders only
✅ Answer: C. Maintaining impartiality and confidentiality
Explanation: Ethics requires that investigators remain objective and protect sensitive
information.11. What is the primary purpose of a forensic audit?
A. To prepare taxes for a corporation
B. To reduce operational expenses
C. To detect and investigate fraud or financial misconduct
D. To ensure compliance with IT policies
✅ Answer: C. To detect and investigate fraud or financial misconduct
Explanation: Forensic audits are conducted to uncover evidence of criminal activity
or internal wrongdoing.
12. Which of the following is NOT a common method of asset concealment in fraud?
A. Shell companies
B. Real estate investments
C. Bank reconciliations
D. Offshore accounts
✅ Answer: C. Bank reconciliations
Explanation: Bank reconciliations are standard accounting practices, not used to
conceal assets.
ACTUAL EXAM
1. Which of the following is most commonly associated with a Ponzi scheme?
A. Use of falsified vendor invoices
B. Return of investment from new investors
C. Bribery of government officials
D. Overstating revenue in financial statements
✅ Answer: B. Return of investment from new investors
Explanation: Ponzi schemes pay returns to earlier investors using the capital from
new investors, rather than legitimate profits.
2. The Bank Secrecy Act (BSA) requires financial institutions to report cash
transactions over what threshold?
A. $1,000
B. $3,000
C. $5,000
D. $10,000
✅ Answer: D. $10,000
Explanation: Institutions must file a Currency Transaction Report (CTR) for cash
transactions over $10,000.
3. Which red flag may indicate potential trade-based money laundering?
A. Payment in advance for low-risk shipments
,B. Pricing inconsistent with market rates
C. Delay in shipping documentation
D. Use of reputable logistics firms
✅ Answer: B. Pricing inconsistent with market rates
Explanation: Over/under invoicing and misrepresentation of price or quantity are
indicators of trade-based money laundering.
4. Which financial crime is MOST likely when an employee creates fake vendors and
submits invoices for payment?
A. Embezzlement
B. Larceny
C. Fraudulent disbursement
D. Skimming
✅ Answer: C. Fraudulent disbursement
Explanation: This involves unauthorized use of company funds through fake vendors
or false billing.
5. In forensic accounting, what does "Benford’s Law" help detect?
A. Hidden offshore accounts
B. Bribery payments
C. Anomalies in numeric data
D. Identity theft
✅ Answer: C. Anomalies in numeric data
Explanation: Benford’s Law is used to identify fraudulent numbers by analyzing the
frequency distribution of digits.
6. Which regulation requires customer due diligence for new accounts?
A. Sarbanes-Oxley Act
B. USA PATRIOT Act
,C. Gramm-Leach-Bliley Act
D. RICO Act
✅ Answer: B. USA PATRIOT Act
Explanation: The act mandates that institutions verify identities of individuals
opening new accounts (KYC).
7. What is the first phase in the money laundering cycle?
A. Integration
B. Structuring
C. Placement
D. Layering
✅ Answer: C. Placement
Explanation: Placement involves introducing illegal funds into the financial system.
8. Which investigative technique is most effective for tracing complex transaction
paths?
A. Digital surveillance
B. Data mining
C. Link analysis
D. Eyewitness testimony
✅ Answer: C. Link analysis
Explanation: Link analysis maps connections between people, entities, and
transactions.
9. What is the primary goal of a Suspicious Activity Report (SAR)?
A. To recover stolen funds
B. To report non-compliance to shareholders
C. To alert financial regulators of suspicious behavior
D. To notify customers of unusual activity
, ✅ Answer: C. To alert financial regulators of suspicious behavior
Explanation: SARs help law enforcement identify and investigate potential financial
crimes.
10. Which is considered a key ethical responsibility of financial crimes investigators?
A. Maximizing organizational profit
B. Ensuring prosecution at all costs
C. Maintaining impartiality and confidentiality
D. Reporting to shareholders only
✅ Answer: C. Maintaining impartiality and confidentiality
Explanation: Ethics requires that investigators remain objective and protect sensitive
information.11. What is the primary purpose of a forensic audit?
A. To prepare taxes for a corporation
B. To reduce operational expenses
C. To detect and investigate fraud or financial misconduct
D. To ensure compliance with IT policies
✅ Answer: C. To detect and investigate fraud or financial misconduct
Explanation: Forensic audits are conducted to uncover evidence of criminal activity
or internal wrongdoing.
12. Which of the following is NOT a common method of asset concealment in fraud?
A. Shell companies
B. Real estate investments
C. Bank reconciliations
D. Offshore accounts
✅ Answer: C. Bank reconciliations
Explanation: Bank reconciliations are standard accounting practices, not used to
conceal assets.
