CFCI Certification Study Guide

Illegal activity (theft, deception, or both) targeting financial institutions.

Common misconceptions about fraud, for example, that fraud is rare or easily preventable.

Describes the distribution of individuals in terms of fraud susceptibility: 20% will never commit fraud; 60% are likely to commit if opportunity presents itself; and 20% are inherently dishonest.

Fraud committed by employees or managers within a financial institution.

Insider fraud committed by managers, often resulting in greater financial loss compared to employee-level fraud, but less frequent.

A model explaining employee fraud, highlighting the three factors of opportunity, financial pressure, and rationalization.

Part of the Fraud Triangle, favorable conditions that allow for fraudulent activities.

A cause of fraud, stemming from employee's financial strain. This is a part of the Fraud Triangle.

Submitting false receipts for expenses under the threshold (e.g., under $25 for meals) to claim fraudulent amounts.

Claiming expenses not allowed by the company policy (e.g., personal expenses disguised as business-related costs).

Legitimate cardholders using company cards for personal expenses and misrepresenting them as legitimate business purchases.

Fraudulent processing of payment transactions, often involving forged checks or stolen credit card details, executed by someone external to a legitimate cardholder.

A check signed by someone other than the legitimate authorized signer without their consent.

Stealing checks made payable to a legitimate party and altering the payee information to oneself or a different party.

Internal fraud where an insider in accounts payable changes vendor information within the payment system, to a look-alike company, often just for a short-time.

Changing the numerical amount written on a check by modifying the amount.

Fraudulent activity involving depositing a legitimate check, writing a bad check for more, and depositing it in a second bank account, to withdraw money before the bad check bounces.

Fraudulent activity targeting accounts newly opened within 90 days, often opened solely for fraud.

Process of making illegally obtained money appear legitimate by putting it into the banking system and using it for transactions to hide origins.

First stage of money laundering, where cash is physically given to legitimate businesses (like banks or casinos).

Second stage of money laundering, where ill-gotten cash is converted into different forms and moved through numerous transactions to obscure its origins (e.g., stock purchases, real estate).

Third stage of money laundering, where laundered cash is incorporated into seemingly legitimate financial activities (e.g., real estate, luxury goods).

First anti-money-laundering law to establish reporting and record-keeping requirements for financial institutions to track cash and monetary instruments.

Law signed after the 9/11 attacks, aimed at deterring terrorism and increasing the government's ability to track financial transactions.

A set of rules and procedures financial institutions must follow to prevent money laundering and terrorist financing.

A report filed with FinCEN when a financial transaction involving cash exceeds $10,000.

Crimes committed during construction projects, often involving inflated costs, fake bids, or misappropriated funds.

Fraud committed by borrowers who falsify loan documents to obtain a mortgage they wouldn't normally qualify for.

Fraud committed by professionals like brokers or appraisers, who manipulate loan documents for financial gain.

A psychological tactic used to manipulate people into giving up confidential information or taking actions that benefit the fraudster.

A form of social engineering using emails or websites to deceive victims into giving up their personal details.

Fraudulent arrangements where contractors secretly agree on prices before bidding, ensuring one gets the contract.

A process to identify, analyze, and manage potential fraud risks within an organization.

The probability that a specific type of fraud will occur, considering factors like past incidents and industry trends.

The potential financial impact of fraud on stakeholders like shareholders or lenders.

Categorizations of fraud risks based on their likelihood of occurrence.

A fraud risk with a significant potential financial impact that requires investigation and evidence gathering.

Evaluating existing controls to determine their effectiveness in preventing specific fraud scenarios.

The design and effectiveness of controls in minimizing the likelihood of fraud occurring and control failures.

Measures taken to reduce or eliminate the likelihood or impact of fraud risks.

The Dodd-Frank Act created the Federal Insurance Office (FIO) to identify insurance companies that pose systemic risks, like AIG during the 2008 financial crisis.

Dodd-Frank established the Office of Credit Rating at the SEC to regulate agencies like Moody's and Standard & Poor's, which were criticized for inflating ratings during the 2008 crisis.

The Consumer Financial Protection Bureau (CFPB), created by Dodd-Frank, protects consumers from unfair practices by banks and lenders.

This provision encourages individuals with information about securities law violations to report them to the government for financial rewards, combating corruption and insider trading.

Dodd-Frank created a public clearinghouse, similar to the stock exchange, for derivatives trades to increase transparency and oversight.

The Federal Insurance Office (FIO) under the Treasury Department aims to identify and manage systemic risks posed by insurance companies.

The Office of Credit Rating, part of the SEC, aims to regulate credit rating agencies, ensuring accurate and unbiased assessments of investment risk.

The Consumer Financial Protection Bureau (CFPB) protects consumers from unfair and deceptive practices by banks and other lenders, ensuring fair treatment in financial transactions.