CFCI Study Guide – Updated Notes for 2024-2025 | Complete Fraud and
Compliance Exam Review
This document is a fully updated 2024–2025 study guide for the CFCI
(Certified Financial Crimes Investigator) exam, offering a
comprehensive overview of key fraud concepts. It includes high-yield
notes and definitions covering types of fraud, red flags, internal
controls, loan fraud schemes, the fraud triangle and diamond,
regulatory acts (e.g., BSA, FCPA, FACTA), and methods of fraud
detection and prevention. It is ideal for professionals preparing for
financial crime certifications and compliance assessments.
Latest Updated Exam study Guide 2025/2026
"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." - ansFraud
Internal Fraud and External Fraud - ansMain types of fraud
Which involves the employees of the company against which the fraud is perpetrated. Also
Referred to as Occupational Fraud. - ansInternal Fraud
Deceptive conduct by non-employees that
deprives the organization of value, and/or is undertaken for financial gain. - ansExternal
Fraud
The theft of money, property, or other assets of the employer. The act by one or more
individuals of dishonestly withholding or misappropriating assets entrusted to them, for the
purpose of using them for personal benefit. Authorized to have lawful possession of the
asset/property. However, he/she has no right to convert, change, or alter the characteristics of
the asset, or to convert title from its rightful owner. - ansEmbezzlement
"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. -
ansFinancial Fraud
Accounts receivable fraud, this
involves simply stealing cash before it enters the organization's accounting system. -
ansSkimming (cash larceny)
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. - ansBilling Schemes
Taking advantage of employee access to blank company checks, using a password to
steal computer-generated checks, or producing counterfeit checks. - ansCheck Tampering
Making false claims for reimbursement, or inflating or creating fictitious business expenses.
(Travel /meal reimbursement. - ansEmployee Reimbursement Scheme
**Bribery (when something of value is offered or given to influence a business decision),
**Illegal gratuities (when something of value is given to an employee to reward a business
decision), and **Extortion (when a person demands payment or seeks to influence a business
decision by threat of harm through loss of business or personal injury). - ansCorruption
When something of value is offered or given to influence a business decision. Bribery, illegal
gratuities, and/or extortion. Bribery is a "quid pro quo" or "this for that," - ansBribery
When something of value is given to an employee to reward a business decision. Gratuity is
"a reward" or "a gift." - ansIllegal Gratuities
,CFCI Study Guide – Updated Notes for 2024-2025 | Complete Fraud and
Compliance Exam Review
This document is a fully updated 2024–2025 study guide for the CFCI
(Certified Financial Crimes Investigator) exam, offering a
comprehensive overview of key fraud concepts. It includes high-yield
notes and definitions covering types of fraud, red flags, internal
controls, loan fraud schemes, the fraud triangle and diamond,
regulatory acts (e.g., BSA, FCPA, FACTA), and methods of fraud
detection and prevention. It is ideal for professionals preparing for
financial crime certifications and compliance assessments.
Latest Updated Exam study Guide 2025/2026
When a person demands payment or seeks to influence a business decision by threat of harm
through loss of business or personal injury. - ansExtortion
Involving employees and vendors, often using inflated billing or invoices for which the
employee is paid a portion of the inflated or fictitious invoice. - ansKickback Schemes
The creation, sale, or use of a counterfeit credit card, or the use of a stolen credit or debit
card. - ansCredit Card Fraud/ Debit Card
Card not present transactions - ansC.N.P
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. -
ansidentity fraud
the fraudulent acquisition or stealing of confidential personal information. - ansidentity theft
Theft (stealing money, ID, or assests) and deception (cooking the books, lying to
shareholders, employees or partners) - ans2 categories that encompass Fraud
"We have very little fraud here" ex: subprime mortgage fraud
*One of the best examples of the we-have-no-fraud-here myth is the case of subprime
mortgage fraud. In the 1990s and leading up to the housing crash that began in 2007, banks
were lending dollars to unqualified mortgage borrowers by the billions - ansMyth #1 of the
Financial Services
"Ethics and training compliance has us covered" Fraud is not always covered in ethics policy
or training.
*The Sarbanes-Oxley Act of 2002 requires all publicly traded companies to inform the
Securities and Exchange Commission if they have a code of conduct in place. If they do not,
they are required to explain why - ansMyth #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. -
ansMyth #3 of Financial Services
• 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. - ansChapter 1 review
points
,CFCI Study Guide – Updated Notes for 2024-2025 | Complete Fraud and
Compliance Exam Review
This document is a fully updated 2024–2025 study guide for the CFCI
(Certified Financial Crimes Investigator) exam, offering a
comprehensive overview of key fraud concepts. It includes high-yield
notes and definitions covering types of fraud, red flags, internal
controls, loan fraud schemes, the fraud triangle and diamond,
regulatory acts (e.g., BSA, FCPA, FACTA), and methods of fraud
detection and prevention. It is ideal for professionals preparing for
financial crime certifications and compliance assessments.
Latest Updated Exam study Guide 2025/2026
20% of people will never commit fraud
60% are fence sitters and may commit fraud if given the opportunity
20% of people inherently dishonest (pg 29) - ans20-60-20 rule of human component of fraud
Employee level fraud and management level fraud - ans2 types of insider fraud threat
Management level fraud is committed less frequently than employee level fraud however the
financial loss is greater. (pg 30) - ansInverse ratio between the level of organization at which
fraud is committed
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. - ansFinancial pressure
employee identifies a weakness in the organization's anti-fraud controls. Such a weakness
might exist, 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. -
ansOpportunity
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." - ansRationalization
Helps explain the ways in which many frauds are committed by employees, middle
managers, and executives of financial services organizations. (pg34) - ansOpportunity
Element of the triangle
Personal Greed, was considered the 4th side of the diamond. (pg 36) - ansWhat caused the
Fraud Triangle to morph into the Fraud Diamond
Internal fraud where an employee can submit a fictitious loan to a loan officer of the same
company. - ansLoans to phantom borrowers Start of chpt 4
the fraudster will make loan payments from funds received from subsequently closed or older
fraudulent loans in a form of loan lapping scheme. - ansLoan Lapping (aka accounts payable
fraud)
"A third-party"or "nominee" loan is a loan in the name of one party that is intended for use by
another. In other words, a persons PII is used with permission to secure a loan for someone
who would not qualify, thus circumventing the system. - ansNominee or straw borrowers
A bank insider is induced to approve a loan to a non-credit worthy borrower, where the
borrowers agrees to give something of value to the banker to approve the loan. - ansKickback
on Illegal loans
a dishonest loan officer or bank manager agrees to authorize loans to one or more crooked
bank colleagues or to dishonest counterparts in other financial institutions made with the
, CFCI Study Guide – Updated Notes for 2024-2025 | Complete Fraud and
Compliance Exam Review
This document is a fully updated 2024–2025 study guide for the CFCI
(Certified Financial Crimes Investigator) exam, offering a
comprehensive overview of key fraud concepts. It includes high-yield
notes and definitions covering types of fraud, red flags, internal
controls, loan fraud schemes, the fraud triangle and diamond,
regulatory acts (e.g., BSA, FCPA, FACTA), and methods of fraud
detection and prevention. It is ideal for professionals preparing for
financial crime certifications and compliance assessments.
Latest Updated Exam study Guide 2025/2026
understanding that a comparable, reciprocal loan or favor would be made in return. (pg 39) -
ansReciprocal loans
a form of loan fraud in which a large depositor or a deposit broker agrees to give a bank its
business in exchange for a loan that it might otherwise not qualify for or that is used to
perpetrate a real estate fraud. - ansLinked financing
typically are made by committing the borrower's receivables, inventory, or other assets as
collateral. Also referred to a "Floor-plan" lending as merchandise is used as collateral for the
loan. - ansWorking Capital or Asset-based Loan Fraud
bank employees with authority to credit and debit these accounts would and to move funds
held in suspense accounts the fraudster controls, such as a personal checking account. -
ansSuspense Account fraud
1. Application
2. Tax return/financial statement
3. Appraisal
4. Verification of deposit
5. Verification of employment
6. Escrow/closing documents
7. Credit documents - ansTypes of mortgage fraud
Soft indicators and hard indicators. - ansTwo key categories of indicators of potential or
actual employee
fraud.
Are intangible, behavioral signs displayed by dishonest employees or employees with an
intention to commit fraud. - ansSoft indicators
Are pieces of evidence that are tangible. Often they are signs represented by numerical
oddities or by physical evidence. - ansHard indicators
refers to separating job functions in a way that no single employee is in a position with
sufficient authority to perpetrate a fraud, either single-handedly or with a collusive vendor,
customer, or ex-employee.
The responsibility for record-keeping for an asset should be separate from the physical
custody of that asset. - ansSegregation of Duties (SoD)
refers to having specific levels of authority, indicating who is permitted to approve particular
components of the lending process, performing postfunding review functions and other key
credit-related activities. This - ansdelegation of authority
• While fraud was instrumental in bringing about the subprime mortgage crisis, it is important
for
anti-fraud professionals to remember that nonmortgage loan frauds and numerous forms of
other internal white-collar crime also can be very costly.
• Mortgage fraud, while sometimes perpetrated by dishonest insiders, is primarily an
externally
Compliance Exam Review
This document is a fully updated 2024–2025 study guide for the CFCI
(Certified Financial Crimes Investigator) exam, offering a
comprehensive overview of key fraud concepts. It includes high-yield
notes and definitions covering types of fraud, red flags, internal
controls, loan fraud schemes, the fraud triangle and diamond,
regulatory acts (e.g., BSA, FCPA, FACTA), and methods of fraud
detection and prevention. It is ideal for professionals preparing for
financial crime certifications and compliance assessments.
Latest Updated Exam study Guide 2025/2026
"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." - ansFraud
Internal Fraud and External Fraud - ansMain types of fraud
Which involves the employees of the company against which the fraud is perpetrated. Also
Referred to as Occupational Fraud. - ansInternal Fraud
Deceptive conduct by non-employees that
deprives the organization of value, and/or is undertaken for financial gain. - ansExternal
Fraud
The theft of money, property, or other assets of the employer. The act by one or more
individuals of dishonestly withholding or misappropriating assets entrusted to them, for the
purpose of using them for personal benefit. Authorized to have lawful possession of the
asset/property. However, he/she has no right to convert, change, or alter the characteristics of
the asset, or to convert title from its rightful owner. - ansEmbezzlement
"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. -
ansFinancial Fraud
Accounts receivable fraud, this
involves simply stealing cash before it enters the organization's accounting system. -
ansSkimming (cash larceny)
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. - ansBilling Schemes
Taking advantage of employee access to blank company checks, using a password to
steal computer-generated checks, or producing counterfeit checks. - ansCheck Tampering
Making false claims for reimbursement, or inflating or creating fictitious business expenses.
(Travel /meal reimbursement. - ansEmployee Reimbursement Scheme
**Bribery (when something of value is offered or given to influence a business decision),
**Illegal gratuities (when something of value is given to an employee to reward a business
decision), and **Extortion (when a person demands payment or seeks to influence a business
decision by threat of harm through loss of business or personal injury). - ansCorruption
When something of value is offered or given to influence a business decision. Bribery, illegal
gratuities, and/or extortion. Bribery is a "quid pro quo" or "this for that," - ansBribery
When something of value is given to an employee to reward a business decision. Gratuity is
"a reward" or "a gift." - ansIllegal Gratuities
,CFCI Study Guide – Updated Notes for 2024-2025 | Complete Fraud and
Compliance Exam Review
This document is a fully updated 2024–2025 study guide for the CFCI
(Certified Financial Crimes Investigator) exam, offering a
comprehensive overview of key fraud concepts. It includes high-yield
notes and definitions covering types of fraud, red flags, internal
controls, loan fraud schemes, the fraud triangle and diamond,
regulatory acts (e.g., BSA, FCPA, FACTA), and methods of fraud
detection and prevention. It is ideal for professionals preparing for
financial crime certifications and compliance assessments.
Latest Updated Exam study Guide 2025/2026
When a person demands payment or seeks to influence a business decision by threat of harm
through loss of business or personal injury. - ansExtortion
Involving employees and vendors, often using inflated billing or invoices for which the
employee is paid a portion of the inflated or fictitious invoice. - ansKickback Schemes
The creation, sale, or use of a counterfeit credit card, or the use of a stolen credit or debit
card. - ansCredit Card Fraud/ Debit Card
Card not present transactions - ansC.N.P
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. -
ansidentity fraud
the fraudulent acquisition or stealing of confidential personal information. - ansidentity theft
Theft (stealing money, ID, or assests) and deception (cooking the books, lying to
shareholders, employees or partners) - ans2 categories that encompass Fraud
"We have very little fraud here" ex: subprime mortgage fraud
*One of the best examples of the we-have-no-fraud-here myth is the case of subprime
mortgage fraud. In the 1990s and leading up to the housing crash that began in 2007, banks
were lending dollars to unqualified mortgage borrowers by the billions - ansMyth #1 of the
Financial Services
"Ethics and training compliance has us covered" Fraud is not always covered in ethics policy
or training.
*The Sarbanes-Oxley Act of 2002 requires all publicly traded companies to inform the
Securities and Exchange Commission if they have a code of conduct in place. If they do not,
they are required to explain why - ansMyth #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. -
ansMyth #3 of Financial Services
• 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. - ansChapter 1 review
points
,CFCI Study Guide – Updated Notes for 2024-2025 | Complete Fraud and
Compliance Exam Review
This document is a fully updated 2024–2025 study guide for the CFCI
(Certified Financial Crimes Investigator) exam, offering a
comprehensive overview of key fraud concepts. It includes high-yield
notes and definitions covering types of fraud, red flags, internal
controls, loan fraud schemes, the fraud triangle and diamond,
regulatory acts (e.g., BSA, FCPA, FACTA), and methods of fraud
detection and prevention. It is ideal for professionals preparing for
financial crime certifications and compliance assessments.
Latest Updated Exam study Guide 2025/2026
20% of people will never commit fraud
60% are fence sitters and may commit fraud if given the opportunity
20% of people inherently dishonest (pg 29) - ans20-60-20 rule of human component of fraud
Employee level fraud and management level fraud - ans2 types of insider fraud threat
Management level fraud is committed less frequently than employee level fraud however the
financial loss is greater. (pg 30) - ansInverse ratio between the level of organization at which
fraud is committed
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. - ansFinancial pressure
employee identifies a weakness in the organization's anti-fraud controls. Such a weakness
might exist, 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. -
ansOpportunity
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." - ansRationalization
Helps explain the ways in which many frauds are committed by employees, middle
managers, and executives of financial services organizations. (pg34) - ansOpportunity
Element of the triangle
Personal Greed, was considered the 4th side of the diamond. (pg 36) - ansWhat caused the
Fraud Triangle to morph into the Fraud Diamond
Internal fraud where an employee can submit a fictitious loan to a loan officer of the same
company. - ansLoans to phantom borrowers Start of chpt 4
the fraudster will make loan payments from funds received from subsequently closed or older
fraudulent loans in a form of loan lapping scheme. - ansLoan Lapping (aka accounts payable
fraud)
"A third-party"or "nominee" loan is a loan in the name of one party that is intended for use by
another. In other words, a persons PII is used with permission to secure a loan for someone
who would not qualify, thus circumventing the system. - ansNominee or straw borrowers
A bank insider is induced to approve a loan to a non-credit worthy borrower, where the
borrowers agrees to give something of value to the banker to approve the loan. - ansKickback
on Illegal loans
a dishonest loan officer or bank manager agrees to authorize loans to one or more crooked
bank colleagues or to dishonest counterparts in other financial institutions made with the
, CFCI Study Guide – Updated Notes for 2024-2025 | Complete Fraud and
Compliance Exam Review
This document is a fully updated 2024–2025 study guide for the CFCI
(Certified Financial Crimes Investigator) exam, offering a
comprehensive overview of key fraud concepts. It includes high-yield
notes and definitions covering types of fraud, red flags, internal
controls, loan fraud schemes, the fraud triangle and diamond,
regulatory acts (e.g., BSA, FCPA, FACTA), and methods of fraud
detection and prevention. It is ideal for professionals preparing for
financial crime certifications and compliance assessments.
Latest Updated Exam study Guide 2025/2026
understanding that a comparable, reciprocal loan or favor would be made in return. (pg 39) -
ansReciprocal loans
a form of loan fraud in which a large depositor or a deposit broker agrees to give a bank its
business in exchange for a loan that it might otherwise not qualify for or that is used to
perpetrate a real estate fraud. - ansLinked financing
typically are made by committing the borrower's receivables, inventory, or other assets as
collateral. Also referred to a "Floor-plan" lending as merchandise is used as collateral for the
loan. - ansWorking Capital or Asset-based Loan Fraud
bank employees with authority to credit and debit these accounts would and to move funds
held in suspense accounts the fraudster controls, such as a personal checking account. -
ansSuspense Account fraud
1. Application
2. Tax return/financial statement
3. Appraisal
4. Verification of deposit
5. Verification of employment
6. Escrow/closing documents
7. Credit documents - ansTypes of mortgage fraud
Soft indicators and hard indicators. - ansTwo key categories of indicators of potential or
actual employee
fraud.
Are intangible, behavioral signs displayed by dishonest employees or employees with an
intention to commit fraud. - ansSoft indicators
Are pieces of evidence that are tangible. Often they are signs represented by numerical
oddities or by physical evidence. - ansHard indicators
refers to separating job functions in a way that no single employee is in a position with
sufficient authority to perpetrate a fraud, either single-handedly or with a collusive vendor,
customer, or ex-employee.
The responsibility for record-keeping for an asset should be separate from the physical
custody of that asset. - ansSegregation of Duties (SoD)
refers to having specific levels of authority, indicating who is permitted to approve particular
components of the lending process, performing postfunding review functions and other key
credit-related activities. This - ansdelegation of authority
• While fraud was instrumental in bringing about the subprime mortgage crisis, it is important
for
anti-fraud professionals to remember that nonmortgage loan frauds and numerous forms of
other internal white-collar crime also can be very costly.
• Mortgage fraud, while sometimes perpetrated by dishonest insiders, is primarily an
externally
