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Forensic Accounting & Financial Fraud Investigation Flashcards

7 cards from real CFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. The Bank Secrecy Act (BSA) requires financial institutions to file a Currency Transaction Report (CTR) for cash transactions exceeding what threshold?

    Answer: $10,000

    The BSA mandates that financial institutions file a CTR for any cash transaction exceeding $10,000, creating a paper trail that forensic examiners can use to trace large cash movements.

  2. What is 'structuring' (also called 'smurfing') in the context of money laundering?

    Answer: Deliberately breaking up large cash deposits into smaller amounts below reporting thresholds to avoid detection

    Structuring involves deliberately making multiple smaller cash transactions to stay below the $10,000 CTR threshold — it is itself a federal crime under 31 U.S.C. § 5324.

  3. Which stage of the money laundering process involves moving funds through complex transactions to conceal their origin?

    Answer: Layering

    Layering is the second stage of money laundering, involving complex financial transactions — wire transfers, currency conversions, shell companies — designed to obscure the audit trail.

  4. Under the Foreign Corrupt Practices Act (FCPA), which activity is prohibited for U.S. companies and their agents?

    Answer: Paying bribes to foreign government officials to obtain or retain business

    The FCPA prohibits U.S. persons and companies from bribing foreign government officials to gain business advantages, and also requires accurate books and records.

  5. In a financial fraud investigation, what does 'tracing' refer to?

    Answer: Following the flow of funds from their source through subsequent transactions to their final destination

    Tracing involves following the path of specific funds through a series of transactions to establish where money came from and where it ultimately went.

  6. Which forensic accounting method reconstructs a subject's income by analyzing all deposits made to bank accounts during the investigation period?

    Answer: Bank deposit method

    The bank deposit method estimates income by totaling all deposits and adjusting for non-income items; deposits exceeding reported income suggest unreported taxable income.

  7. What is the significance of a Suspicious Activity Report (SAR) filed by a financial institution in a fraud investigation?

    Answer: It notifies FinCEN of transactions that may involve money laundering, fraud, or other financial crimes

    SARs are filed with FinCEN (Financial Crimes Enforcement Network) to flag suspicious financial activity; forensic investigators can access SAR data through law enforcement channels.