CFCI Study Guide UPDATED ACTUAL
Questions and CORRECT Answers
Fraud - CORRECT 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 - CORRECT ANSWER - Internal Fraud and External Fraud
Internal Fraud - CORRECT ANSWER - which involves the employees of the company
against which the fraud is perpetrated
External Fraud - CORRECT ANSWER - deceptive conduct by non-employees that
deprives the organization of value, and/or is undertaken for financial gain.
embezzlement - CORRECT ANSWER - theft or misappropriation of funds placed in one's
trust or belonging to one's employer.
financial fraud - CORRECT 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) - CORRECT ANSWER - Accounts receivable fraud, this
involves simply stealing cash before it enters the organization's accounting system.
Billing Schemes - CORRECT 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 - CORRECT 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 - CORRECT ANSWER - making false claims for
reimbursement, or inflating or creating fictitious business expenses. (Travel /meal
reimbursement.
corruption - CORRECT ANSWER - Bribery, illegal gratuities, and/or extortion.
bribery - CORRECT ANSWER - when something of value is offered or given to influence
a business decision
Illegal Gratuities - CORRECT ANSWER - when something of value is given to an
employee to reward a business decision.
Extortion - CORRECT 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 - CORRECT 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 - CORRECT ANSWER - the creation, sale, or use of a counterfeit credit
card, or the use of a stolen credit or debit card.
C.N.P - CORRECT ANSWER - Card not present transactions
identity fraud - CORRECT 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 - CORRECT ANSWER - the fraudulent acquisition or stealing of
confidential personal information.
2 categories that encompass Fraud - CORRECT ANSWER - Theft (stealing money, ID, or
assests) and deception (cooking the books, lying to shareholders, employees or partners)
Myth #1 of the Financial Services - CORRECT ANSWER - "We have very little fraud
here" ex: subprime mortgage fraud
Myth #2 of Financial Services - CORRECT ANSWER - "Ethics and training compliance
has us covered" Fraud is not always covered in ethics policy or training.
Myth #3 of Financial Services - CORRECT 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 - CORRECT ANSWER - • The numbers do not lie: Fraud is a
huge worldwide problem—for all organizations.
• Financial services fraud. Seventy-one percent of financial institutions experienced attempted
payment fraud (check fraud, ACH fraud, or credit card fraud in 2017).
• 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
con-
stantly thinking up new ways to target financial services institutions.
Questions and CORRECT Answers
Fraud - CORRECT 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 - CORRECT ANSWER - Internal Fraud and External Fraud
Internal Fraud - CORRECT ANSWER - which involves the employees of the company
against which the fraud is perpetrated
External Fraud - CORRECT ANSWER - deceptive conduct by non-employees that
deprives the organization of value, and/or is undertaken for financial gain.
embezzlement - CORRECT ANSWER - theft or misappropriation of funds placed in one's
trust or belonging to one's employer.
financial fraud - CORRECT 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) - CORRECT ANSWER - Accounts receivable fraud, this
involves simply stealing cash before it enters the organization's accounting system.
Billing Schemes - CORRECT 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 - CORRECT 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 - CORRECT ANSWER - making false claims for
reimbursement, or inflating or creating fictitious business expenses. (Travel /meal
reimbursement.
corruption - CORRECT ANSWER - Bribery, illegal gratuities, and/or extortion.
bribery - CORRECT ANSWER - when something of value is offered or given to influence
a business decision
Illegal Gratuities - CORRECT ANSWER - when something of value is given to an
employee to reward a business decision.
Extortion - CORRECT 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 - CORRECT 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 - CORRECT ANSWER - the creation, sale, or use of a counterfeit credit
card, or the use of a stolen credit or debit card.
C.N.P - CORRECT ANSWER - Card not present transactions
identity fraud - CORRECT 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 - CORRECT ANSWER - the fraudulent acquisition or stealing of
confidential personal information.
2 categories that encompass Fraud - CORRECT ANSWER - Theft (stealing money, ID, or
assests) and deception (cooking the books, lying to shareholders, employees or partners)
Myth #1 of the Financial Services - CORRECT ANSWER - "We have very little fraud
here" ex: subprime mortgage fraud
Myth #2 of Financial Services - CORRECT ANSWER - "Ethics and training compliance
has us covered" Fraud is not always covered in ethics policy or training.
Myth #3 of Financial Services - CORRECT 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 - CORRECT ANSWER - • The numbers do not lie: Fraud is a
huge worldwide problem—for all organizations.
• Financial services fraud. Seventy-one percent of financial institutions experienced attempted
payment fraud (check fraud, ACH fraud, or credit card fraud in 2017).
• 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
con-
stantly thinking up new ways to target financial services institutions.
