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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/
"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
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/
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
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/
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
- Application
- Tax return/financial statement
- Appraisal
- Verification of deposit
- Verification of employment
- Escrow/closing documents
- 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/
initiated fraud. The criminals typically include dishonest mortgage brokers, appraisers, borrowers, and builders.
- The first step toward preventing employee-level fraud is understanding and detecting the numer- ous red flags of such schemes.
- With a solid understanding of red flags, an organization can conduct detailed risk assessments to gather evidence of suspected frauds and put into place effective controls to minimize vulnerability to most employee-level frauds.
- A virtually limitless variety of anti-fraud controls can be implemented to minimize the organiza- tion's fraud r - ansChapter 3 review points Looting customer accounts such as savings and checking by teller skimming o bank funds and (#2) exploiting control weakness in the bank's operations such as account payable and procurement. - ans2 types of employee level embezzlement Making unauthorized withdrawals, by diverting funds of customers to accounts with false records - ansLooting crimes Employees use dormant accounts to transfer money. An account is considered dormant after more than 12 months of inactivity and/or statements are returned as undeliverable. - ansDormant account fraud Since the CD is usually not touched by the account holder until maturity it gives the employee opportunity to not record deposits or skim. - ansCertificate of Deposit (CD) fraud Bank employees or call center reps would say they returned or credited a bank fee to a customer when it was really credited to their own or coworkers accounts. - ansFraudulent fee reversal Simply put, stealing cash from the teller drawer. - ansTeller Theft of Skimming Theft of cashier's checks, money orders, and traveler's checks - ansTheft of consignment items Fraud committed by a person responsible for paying company invoices, thus giving them ample opportunity to send checks to fake invoices or shell companies. - ansAccounts Payable (AP) or Billing Fraud Setting up shell companies and submitting invoices to be paid, usually a high person who approves third-party payments. The company appears real and legit. - ansShell company and/or phony invoice fraud Employees with access to VMF can generate phony invoices, enter bogus vendors, and obtain approval of fraudulent transactions. - ansVendor Master File (VMF) manipulation dishonest vendors typically involves a bribery or kickback scheme jointly perpetrated by a bank employee and a crooked supplier. - ansCollusion with Vendors
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/
Receipts for transportation, hotel, restaurant, and other business travel expenses are easily obtained and "recycled" by employees either by forgery or by alteration. It is all too easy, for example, to alter the date or amount on a receipt before it is submitted. (T&E Fraud). - ansFalsifying receipts. If receipts are required for all expenses over $25 for meals, an employee may fraudulently submit undocumented claims for amounts of $24.99 or $24.95. (T&E Fraud) - ansClaiming expenses just below the minimum documentation requirement. A dishonest employee may test your organization's anti-fraud controls by submitting a receipt for a personal expense incurred during a business trip. If the form is complicated the processor may just approve payment (T&E Fraud) - ansClaiming for "out-of-policy" expenses. Corporate card used by legitimate holders who charge non-business expenses to the employer and falsely document them as legitimate job-related purchases. (pg 64) - ansPurchasing Card Fraud (P-Card) An electronic network for financial transactions in the U.S. The network processes batches of debits and credits to various financial institutions allowing for fast, safe and efficient transfer of funds. - ansAutomated Clearing House (ACH) a check signed by someone else other than who is specified on the check without that person's permission - ansForged Check An employee stealing blank checks ad making them out to him or herself or cash, and forges the name of the authorized person to sign checks. - ansTheft and Forgery of stolen check Perpetrator steals checks made out to legitimate payee and are signed. The perpetrator white outs the payee, alters or changes the payee information to themselves or others. - ansCheck interception and forgery of endorsement Where an insider in AP, modifies the Vendor Master File changes the name of a legitimate business to a name that is similar enough that it wont be noticed. The perpetrator simply changes the information back after the execution of the fraud. - ansElectronic Payee Alteration Changing the amount of the check by changing one or more number. - ansCheck alteration by inserting numbers Changing or washing the check to change the name of the payee by adding letters or words. - ansCheck alteration by inserting letters A dishonest employee puts an unauthorized check in a pile of authorized checks, betting on the odds that the signer will not check each check and just sign the unauthorized one. - ansHidden check fraud A bank employee using fear or intimidation on a person responsible for issuing the checks (such as AP) to write a check without proper invoices, documentation or signatures etc. - ansCheck fraud intimiation
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/
A perpetrator provides the routing number and the account number of the victim's account to the receiving company (utility, car loans, etc) to make the required payments. - ansACH fraud
- creation of ghost-employees (most common)
- altering hourly rate of pay or commission details
- altering employee status so the company does not have to pay taxes and/or benefits.
- time card alterations, claiming time not really worked, forged supervisor signatures - ansTypes of Payroll Fraud perpetrators (possible employees) steal PII of customers and use the information to commit identity frauds such as unauthorized loans, credit accounts (pg 71) - ansTheft of confidential information insiders pose a substantial threat by virtue of their knowledge of and access to their employers' systems and/or databases, and their ability to bypass existing physical and electronic security measures through legitimate means. - ansInsider abuse of Computer Systems Self dealing is approving loans to ones self (pg 87) - ansManagement-Level self dealing a law that prohibits U.S. corporations from making illegal payments to public officials of foreign governments to obtain business rights or to enhance their business dealings in those countries - ansForeign Corrupt Practices Act (FCPA) misrepresenting financial performance involves recording nonexistent revenue or misrepresenting the period in which the revenue was received. - ansRecording false revenues involves recording revenue—typically loan interest income and interest from investments and related revenue—from a future reporting period in the current period, or understating amounts set aside for loan losses. - ansFraudulent revenue recognition Neglecting to record expenses and burying vendor invoices, management can make it appear as if expenses for a particular reporting period are lower than they actually are, thereby making earnings appear greater than they are. - ansManipulating liabilities failure to mark investments to market when the securities markets decline, overstating the amount of cash, or recording the value of an outstanding loan as being greater than its estimated market value. - ansOverstating Assets Libor (London Inter-Bank Offered Rate) is an average interest rate calculated through submissions of interest rates by major banks across the world. The scandal arose when it was discovered that banks were falsely inflating or deflating their rates so as to profit from trades, or to give the impression that they were more creditworthy than they were - ansManipulating interest rates Fraudster who removes tools from a job site and then sells them and keeps the proceeds but reports the tools as lost. - ansTool Theft Fraudster orders more material than necessary on an existing purchase order and reports the excess s waste or scrap. - ansMaterials Waste
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/
hackers use their social skills to trick people into revealing access credentials or other valuable information - ansSocial Engineering Spoofed email and website in order to trick a person into providing private information - ansPhishing Scam These scams often begin with a phishing Email that gives a fraudster access to an executive's Email account. Typically, the fraudster will then send an Email purporting to be from the CEO requesting a wire transfer of a specified amount to a specified bank account. The trusting treasury or finance employee never thinks to question its legitimacy. - ansBusiness Email Compromise Requires financial institutions to have an identity theft prevention program in place and identifying potential signs of identity theft. - ansFACTA - Fair & Accurate Credit Transactions Act to offenses in which the Internet is used to traffic in and exploit the stolen credit card, bank account, and other personal identification information of hundreds of thousands of victims globally. - ansCarding Europay, MasterCard, Visa the three companies that originally created the standard for card security. - ansEMV acronym Global technology that includes imbedded microchips. The chip creates a unique one-time code that cannot be reused. - ansEMV chip technology Checks that are negotiated at the same bank on which it was drawn. - ansForged on-us Checks Suspect agrees to purchase an item from a victim and sends a check for more than the agreed upon price. The victim is instructed to send the difference. Check bounces victim is out. - ansCashier check fraud Organized crime rings recruit individuals who apply for bank jobs and over time steal the PII of customers and give it to their handlers. - ansBank employee Collusion with outsiders creating cash using the lag between the time a check is deposited and the time it clears the bank - anscheck kiting When illegally obtained money is put into the banking system then using the banking system for the money to appear legitimate. - ansMoney Laundering designed to deter the use of secret foreign bank accounts and to establish a mandatory audit trail for law enforcement by establishing regulatory reporting and record-keeping requirements to help the government track the movement of cash and other monetary instruments into and out of the country through the use of financial institutions. - ansBank Secrecy Act (BSA) *A system of internal controls to ensure ongoing compliance. *Designated AML Compliance Officer. *AML training
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/
*Independent Audit. - ansFour pillars of AML compliance a report that U.S. financial institutions are required to file with FinCEN for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through, or to the financial institution which involves a transaction in currency of more than $10,000. - ansCTR (Currency Transaction Report) analysis of an organization's risks of being victimized by specific types of fraud. - ansFRA - Fraud Risk assessment most FRAs focus on identifying fraud risks in six key categories:
- Fraudulent financial reporting
- Misappropriation of assets
- Expenditures and liabilities for an improper purpose
- Revenue and assets obtained by fraud
- Costs and expenses avoided by fraud
- Financial misconduct by senior management - ansFRAs focus on identifying fraud risks in six key categories: "A broad legal concept that is distinguished from error depending on whether the action is intentional or unintentional." - ansAccording to the American Institute of Certified Public Accountants (AICPA), fraud is? Theft and Deception - ansIncidents of fraudulent activity—also called White-Collar Crime— fall into one or both of two categories: This theory, developed in the 1950's by a prominent criminologist, explains the confluence of financial, occupational, and psychological forces at work when a person—especially one who might ordinarily not commit fraud—decides to steal, bribe, forge, fabricate, or otherwise act in a way that can only be described as fraudulent. The three factors that contribute to fraudulent activity by employees: opportunity, financial pressure, and rationalization. - ansFraud Triangle "Cross the Line" Check forgery, counterfeiting and theft, adding "ghost" employees to the payroll, phony invoicing, etc. - ansEmbezzlement Examples 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". - ansWildcat Banking To expose the criminal activities of financial institutions in the late 1920s, led directly to the drafting and ultimate passage of the Securities Act of 1933, the Securities Act of 1934, and the Glass-Steagall Act of 1932. - ansPecora Commission's work Established the Federal Home Loan Bank Board (FHLBB), whose laudable task was creating a reserve credit system to ensure that ample mortgage credit was available to facilitate home buying. It also became the principal regulatory agency for the S&L industry.1 - ansThe Federal Home Loan Bank Act of 1932
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/
Of 25 industries surveyed by the Association of Certified Fraud Examiners for its 2018 Report to the Nations on Occupational Fraud, "Banking/Financial Services" topped the list with 366 cases. - ansFraud Fact # The most common types of internal fraud affecting the financial services industries (see Exhibit 1.2) are corruption (primarily bribery and kickbacks), theft of cash, check fraud, and expense reimbursement schemes - ansFraud Fact # Reported incidents of mortgage fraud were up by a startling 45 percent in the second quarter of 2008 compared with the same period in 2007 - ansFraud Fact # As would have been expected, in the aftermath of the financial crisis of late 2008, mortgage fraud declined substantially. But the lull did not last long: The most notable increase in loan investigations in 2013 is for fraud and misrepresentation on credit documentation. This type of fraud, involving misrepresentation on the credit report or with credit history or references, increased to 17 percent in 2013 from five percent in 2012 - ansFraud Fact # The total rate of mortgage application fraud rose by 3.5 percent from 2016 to 2017. This represents a relatively normal rate of increase which has held steady since about 2010. - ansFraud Fact # If you hear from a colleague or boss that your organization does not experience much fraud, the statistics prove the opposite. If anything, fraud is getting worse. For that reason, everyone in the organization must be more alert to it than ever. - ansRemember Any illegal acts characterized by deceit, concealment, or violation of trust. These acts are not dependent upon the application of threat of violence or of physical force. Frauds are perpetrated by individuals and organizations to obtain money, property, or services; to avoid payment or loss of services; or to secure personal or business advantage. - ansAccording to the Association of Certified Fraud Examiners, fraud is A broad legal concept that is distinguished from error depending on whether the action is intentional or unintentional - ansAccording to the American Institute of Certified Public Accountants, fraud is There are various definitions of the term "fraud," but the bottom line is that all fraudulent activities fall into the category of either theft or deception—or are a combination of both - ansREMEMBER Fraud, while usually not serious enough to destroy a financial services firm, often is much more than just a necessary cost of doing business. - ansREMEMBER Internal - ansWho commits majority of Fraud? This group includes the far-flung global population of drug traffickers as well as members of organized crime, illegal gambling operators, terrorists, and others. - ansMost serious, in terms of the dollars involved (although not necessarily dollars lost), are money launderers. monitoring and reporting money-laundering activity to federal regulators, because financial institutions typically are not victims of such activity. Nonetheless, because financial institutions have this direct responsibility, financial investigators do need to have a working
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/
knowledge of the legal and regulatory basics for detecting and investigating these increasingly common and costly crimes - ansWhat are Financial institutions directly responsible for? **Dishonest customers (retail and commercial) **Identity thieves/fraudsters **Check forgers and counterfeiters **Dishonest vendors **Ex-employees CHAPTER TWO 25 **Internet fraudsters (including phishing attackers, hackers, malicious code programmers) **Credit card fraudsters **Crooked mortgage brokers, appraisers, and attorneys **ACH account hijackers - ansethically challenged outsiders includes? Employees who commit fraud do have common personality and behavioral traits. They are also prone to scientifically proven psychological influences that help fraud prevention experts to identify them - ansInsider Threat Twenty percent of the people in any organization will never steal—no matter what. They are individuals whose character and integrity are so incorruptible that nothing could pressure or tempt them to do anything dishonest. - ans20- 60 - 20 rule----20% Sixty percent of the people in the organization are "fence sitters." They are basically honest people—having never committed an illegal act in their lives. But if they are in dire financial straits and they are given the opportunity to commit fraud, they might cross the line. - ans20- 60 - 20 rule----60% The remaining 20 percent are inherently dishonest. They will always commit fraud when the opportunity arises. In fact, they often will seek out or even create opportunities to steal or deceive if they think it will result in personal financial gain - ans20- 60 - 20 rule----20% **Employee-level fraud. People who are neither supervisors nor managers commit this type of fraud. They may be salaried professionals or hourly employees. **Management-level fraud. These crimes are committed by managers at all levels, including the most senior levels. Many of the frauds committed by these individuals are the same as those committed by employees lower down on the organization chart. Although committed with less frequency than employee-level fraud, virtually all management-level frauds result in much greater losses than those perpetrated at lower levels. The reason is clear: Managers have more authority and therefore more opportunity to cheat than those who work under them. - ansinsider fraud threat, it is helpful to divide it into two key categories There is an inverse ratio between the level of the organization at which fraud is committed and the amount of financial loss resulting from frauds at each level. Thus, while management-level frauds are committed less frequently than employee-level frauds, the
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/
In 2012, PNC Financial Services acquired RBC Bank. - ansmega-deals in financial-institution ownership # In 2016, Key Bank acquired First Niagara Financial. - ansmega-deals in financial-institution ownership # The questionable ethics governing the "rules" for approving and underwriting subprime home mortgages in the years leading up to the financial crisis encapsulates this myopic "make-the- numbers" driver of pre-crisis financial services management. This mindset was summed up by James LaLiberte, former chief operating officer of People's Choice Bank - ans"Take no prisoners." 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. - ansChapter 2 Review # Internal fraudsters do have common behavioral and personality traits, which helps to detect suspicious activity before it is too late. - ansChapter 2 Review # Up to 80 percent of employees are either totally honest or honest to the point that they will not steal except in situations in which the opportunity to do so presents itself. And even then, these "fence sitters" may err on the side of honesty. The remaining 20 percent of your organization's employees are fundamentally dishonest and will go out of their way to commit fraud - ansChapter 2 Review # Internal fraud can be divided into two categories: employee level and management level. There is an inverse ratio between the level of the organization at which fraud is committed and the amount of financial loss resulting from frauds committed at each level. Thus, while management-level frauds are committed less frequently than employee-level frauds, the financial loss resulting from the former is almost always significantly greater than the amount lost from the latter - ansChapter 2 Review # The Fraud Triangle (Pressure, Opportunity, and Rationalization) helps fraud fighters identify and stop potential fraudsters from carrying out crimes that could result in financial losses to the organization - ansChapter 2 Review # The elements of the Fraud Triangle have their own unique meaning in the context of the financial services industry. - ansChapter 2 Review # The Fraud Triangle can arguably be reinterpreted as a Fraud Diamond when the element of greed is included as a key motivator for fraud in the financial services industry. - ansChapter 2 Review # Creating fake loans by employees to get funds, which wont make the payments. - ansPhantom Borrowers 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)
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/
"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 understanding that a comparable, reciprocal loan or favor would be made in return - 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 The majority of these crimes are perpetrated by external fraudsters—usually by the construction company seeking financing, or by building inspectors and other regulators taking bribes from construction companies to overlook building code or other violations - ansConstruction Loan Fraud 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 Financial institution employees find seemingly countless ways to perpetrate loan fraud by exploiting both their positions and any weaknesses in anti-fraud controls. The first step in preventing these crimes is understanding how they work. - ansREMEMBER
- Application
- Tax return/financial statement
- Appraisal
- Verification of deposit
- Verification of employment
- Escrow/closing documents
- Credit documents - ansTypes of mortgage fraud commonly linked to so-called flipping schemes. Straw buyers are loan applicants who are used by fraudsters to obtain home loans but have no intention of occupying the home being purchased - ans"Straw buyer" Soft indicators and hard indicators. - ansTwo key categories of indicators of potential or actual employeefraud.
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/
security protocols and policies ... strict compliance with all fraud risk-related rules and regulations, and so forth - ansAnti-fraud policies are different from anti-fraud controls Incorporate loan fraud awareness training into your new employee or department orientation programs. A growing number of financial institutions use annual Webbased awareness training and certification programs or formal classroom training to ensure that awareness training content is up to date. - ansREMEMBER It should never be possible for a single loan officer alone to complete all elements of a loan application review. Nor should loans above a specified amount be approved without the review of at least two if not more bank officials. - ansREMEMBER 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. - ansdelegation of authority **Improved fraud awareness training. This specific training should be focused in areas where internal fraud risk or losses are greatest. **More effective anti-fraud spending. Without a clear picture about loan fraud losses, it is difficult to achieve optimal resource allocation for targeted fraud prevention (e.g., electronic check fraud detection tools or automated prefunding screening tools for specific types of loans). **Identification of loan fraud trends. Financial institutions should regularly compare fraud losses among business units to facilitate analysis of the effectiveness of fraud reduction projects. **Budgeting for fraud losses. Separating internally perpetrated loan fraud losses from bad credit and applying the specific losses to the department that originated the fraud losses. This helps to estimate future losses in specific areas of the organization. **Loan fraud investigations. To avoid invest - ansaccording to BITS, separating fraud losses from credit-related losses helps management mitigate fraud risks by facilitating Know Your Customer - ans(KYC) Post-closing quality controls are designed to monitor the effectiveness of your loan production process in generating loans of investment quality in accordance with internal, investor, and industry guidelines. The controls also ensure that loans are in compliance with applicable state and federal laws, rules, and regulations - ansImplement and Enforce Detailed Postclosing Quality Controls Reverification of income, employment, rental history, mortgage history, bank statements, gift funds, and down payment assistance programs (including independent verification of receipt
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/
of down payment assistance funds by the settlement agent). - ansPostfunding reviews to detect fraud should include # An in-depth review of appraisal or other collateral documents. - ansPostfunding reviews to detect fraud should include # 2 Examination of signatures on loan documents for consistency - ansPostfunding reviews to detect fraud should include # Occupancy certification when there is any indication on an owner-occupied loan that the borrower may not be occupying the property. Specifically, look for a mailing address that is different from the property address, public records that fail to show a connection between the borrower and the property address, or a borrower's phone numbers that are in an area code other than the property location's area code - ansPostfunding reviews to detect fraud should include # Detailed loan file review to screen for concealment of noncompliance with lending standards; loan amounts that exceed a loan official's authorized limit; missing collateral valuations; altered or missing borrower identification documentation; altered or forged loan documents. - ansPostfunding reviews to detect fraud should include # Mailing confirmation letters to borrowers to verify loan ownership, address, payment terms, collateral, and so on. This is a common practice by internal and external auditors to validate loan assets on an annual basis. It is conducted by selecting a sample of loans and mailing a letter to the borrower to verify key loan elements. The borrower is asked to sign and notify the bank of any discrepancies - ansPostfunding reviews to detect fraud should include # Mailing confirmation letters to the appraiser to verify that he or she did in fact complete the appraisal report in the file and the value assigned is correct. The appraiser is asked to sign and confirm that he or she completed the appraisal report and assigned value. This process helps identify appraisal report forgeries or alterations - ansPostfunding reviews to detect fraud should include # Review monthly production to identify multiple properties purchased or refinanced by a common party. For example, duplicate loans to the same borrower in the same ZIP code may indicate that a loan is intended to support an investor property rather than owner occupied property. - ansTo monitor for suspicious activity in a loan portfolio # Screen for loan concentrations in specific geographic areas. Identifying average property values in a geographic area and comparing them to your financial institution's portfolio may help to identify pockets of higher-risk loans. Properties with substantially higher-than- average values in a concentrated area could indicate possible fraud. In addition, monitor ZIP codes by loan amount and appraised value to detect unusual variances - ansTo monitor for suspicious activity in a loan portfolio # Periodically review high-volume producers. This may include high-producing geographic markets, an unusually successful internal loan officer or branch associate, or a broker or dealer. A higher-than-average production rate may indicate fraud, especially if the increase is
