CFCI STUDY GUIDE WITH ALL CORRECT & 100%
VERIFIED ANSWERS|LATEST UPDATE|ALREADY
GRADED A+
"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."
✔Correct answer-Fraud
Internal Fraud and External Fraud ✔Correct answer-Main types of fraud
Activities that may be criminal, committed within an organization, typically by the employee against
the employer. ✔Correct answer-Internal Fraud
Deceptive conduct by non-employees that
deprives the organization of value, and/or is undertaken for financial gain. ✔Correct answer-
External Fraud
The theft of money, property, or other assets of the employer. ✔Correct answer-Embezzlement
The taking away of the property of another, with the intent to convert it to his/her own use.
✔Correct answer-Larceny
"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. ✔Correct answer-Financial Fraud
Accounts receivable fraud, this involves simply stealing cash before it enters the organization's
accounting system. ✔Correct answer-Skimming (cash larceny)
Using false documentation to cause a targeted organization to issue a payment for false services
and/or purchases. ✔Correct answer-Billing Schemes
Common method (Taking advantage of employee access to blank company checks, using a password
to
steal computer-generated checks or producing counterfeit checks). ✔Correct answer-Check
Tampering
Making false claims for reimbursement or inflating or creating fictitious business expenses. (Travel
/meal reimbursement. ✔Correct answer-Employee reimbursement scheme
Bribery, illegal gratuities, and/or extortion. ✔Correct answer-Corruption
When something of value is offered or given to influence a business decision. ✔Correct answer-
Bribery
,When something of value is given to an employee to reward a business decision. ✔Correct
answer-Illegal Gratuities
When a person demands payment or seeks to influence a business decision by threat of harm
through loss of business or personal injury. ✔Correct answer-Extortion
Forms 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. ✔Correct answer-
Kickback Schemes
The creation, sale, or use of a counterfeit credit card, or the use of a stolen credit or debit card.
✔Correct answer-Credit Card Fraud
Card not present transactions ✔Correct answer-C.N.P
The fraudulent acquisition or stealing of confidential personal information through social
engineering. ✔Correct answer-Identity Theft
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. ✔Correct
answer-Identity Fraud
An 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". ✔Correct
answer-Wildcat Banking
Theft (stealing money, ID, or assets) and deception (cooking the books, lying to shareholders,
employees or partners) ✔Correct answer-2 categories that encompass Fraud
The 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. ✔Correct answer-Savings and Loan Crisis
"We have very little fraud here" ex: subprime mortgage fraud ✔Correct answer-Myth #1 of the
Financial Services
"Ethics and training compliance has us covered" Fraud is not always covered in ethics policy or
training. ✔Correct answer-Myth #2 of Financial Services
"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. ✔Correct answer-
Myth #3 of Financial Services
• 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. ✔Correct answer-Chapter
1 review points
20% of people will never commit fraud
60% are fence sitters and may commit fraud if given the opportunity
20% of people are inherently dishonest ✔Correct answer-20-60-20 rule of human component of
fraud
Employee level fraud and management level fraud ✔Correct answer-2 types of insider fraud threat
True: Management level fraud is committed less frequently than employee level fraud however the
financial loss is almost always greater. ✔Correct answer-True or False: Managment Level Fraud is
committed less frequently than employee level fraud?
Created by leading criminologist Donald Cressey. The three factors that contribute to fraudulent
activity by employees: opportunity, financial pressure, and rationalization. ✔Correct answer-Fraud
Triangle
Financial 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.
✔Correct answer-Financial pressure
Employee 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. ✔Correct answer-Opportunity
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." ✔Correct answer-
Rationalization
The 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.
✔Correct answer-Remember:
A reevaluation for peoples unadorned lust for money caused personal Greed to become the 4th side,
morphing the triangle into the diamond. ✔Correct answer-What caused the Fraud Triangle to
morph into the Fraud Diamond?
• External fraudsters are a varied and demographically diverse group, which makes it difficult for
fraud fighters to profile these criminals. The best approach to detecting and preventing external
fraud against financial institutions is to understand the red flags of these crimes.
• Internal fraudsters do have common behavioral and personality traits, which helps to detect
suspicious activity before it is too late.
VERIFIED ANSWERS|LATEST UPDATE|ALREADY
GRADED A+
"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."
✔Correct answer-Fraud
Internal Fraud and External Fraud ✔Correct answer-Main types of fraud
Activities that may be criminal, committed within an organization, typically by the employee against
the employer. ✔Correct answer-Internal Fraud
Deceptive conduct by non-employees that
deprives the organization of value, and/or is undertaken for financial gain. ✔Correct answer-
External Fraud
The theft of money, property, or other assets of the employer. ✔Correct answer-Embezzlement
The taking away of the property of another, with the intent to convert it to his/her own use.
✔Correct answer-Larceny
"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. ✔Correct answer-Financial Fraud
Accounts receivable fraud, this involves simply stealing cash before it enters the organization's
accounting system. ✔Correct answer-Skimming (cash larceny)
Using false documentation to cause a targeted organization to issue a payment for false services
and/or purchases. ✔Correct answer-Billing Schemes
Common method (Taking advantage of employee access to blank company checks, using a password
to
steal computer-generated checks or producing counterfeit checks). ✔Correct answer-Check
Tampering
Making false claims for reimbursement or inflating or creating fictitious business expenses. (Travel
/meal reimbursement. ✔Correct answer-Employee reimbursement scheme
Bribery, illegal gratuities, and/or extortion. ✔Correct answer-Corruption
When something of value is offered or given to influence a business decision. ✔Correct answer-
Bribery
,When something of value is given to an employee to reward a business decision. ✔Correct
answer-Illegal Gratuities
When a person demands payment or seeks to influence a business decision by threat of harm
through loss of business or personal injury. ✔Correct answer-Extortion
Forms 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. ✔Correct answer-
Kickback Schemes
The creation, sale, or use of a counterfeit credit card, or the use of a stolen credit or debit card.
✔Correct answer-Credit Card Fraud
Card not present transactions ✔Correct answer-C.N.P
The fraudulent acquisition or stealing of confidential personal information through social
engineering. ✔Correct answer-Identity Theft
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. ✔Correct
answer-Identity Fraud
An 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". ✔Correct
answer-Wildcat Banking
Theft (stealing money, ID, or assets) and deception (cooking the books, lying to shareholders,
employees or partners) ✔Correct answer-2 categories that encompass Fraud
The 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. ✔Correct answer-Savings and Loan Crisis
"We have very little fraud here" ex: subprime mortgage fraud ✔Correct answer-Myth #1 of the
Financial Services
"Ethics and training compliance has us covered" Fraud is not always covered in ethics policy or
training. ✔Correct answer-Myth #2 of Financial Services
"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. ✔Correct answer-
Myth #3 of Financial Services
• 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. ✔Correct answer-Chapter
1 review points
20% of people will never commit fraud
60% are fence sitters and may commit fraud if given the opportunity
20% of people are inherently dishonest ✔Correct answer-20-60-20 rule of human component of
fraud
Employee level fraud and management level fraud ✔Correct answer-2 types of insider fraud threat
True: Management level fraud is committed less frequently than employee level fraud however the
financial loss is almost always greater. ✔Correct answer-True or False: Managment Level Fraud is
committed less frequently than employee level fraud?
Created by leading criminologist Donald Cressey. The three factors that contribute to fraudulent
activity by employees: opportunity, financial pressure, and rationalization. ✔Correct answer-Fraud
Triangle
Financial 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.
✔Correct answer-Financial pressure
Employee 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. ✔Correct answer-Opportunity
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." ✔Correct answer-
Rationalization
The 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.
✔Correct answer-Remember:
A reevaluation for peoples unadorned lust for money caused personal Greed to become the 4th side,
morphing the triangle into the diamond. ✔Correct answer-What caused the Fraud Triangle to
morph into the Fraud Diamond?
• External fraudsters are a varied and demographically diverse group, which makes it difficult for
fraud fighters to profile these criminals. The best approach to detecting and preventing external
fraud against financial institutions is to understand the red flags of these crimes.
• Internal fraudsters do have common behavioral and personality traits, which helps to detect
suspicious activity before it is too late.
