CPI Financial Investigation & Fraud Detection 2

Question 1

A Ponzi scheme is best described as:

Accepted Answer

A fraudulent investment operation paying returns to existing investors using funds from new investors

Answer

A Ponzi scheme generates returns for earlier investors using capital from newer investors rather than legitimate business profits, eventually collapsing when new investor recruitment slows.

Question 2

What is 'check kiting' in the context of banking fraud?

Accepted Answer

Exploiting float time between banks by depositing and withdrawing funds before checks clear

Answer

Check kiting exploits the time delay (float) between when a check is deposited and when it clears, allowing a fraudster to temporarily inflate account balances across multiple banks.

Question 3

Which financial statement shows a company's assets, liabilities, and equity at a specific point in time?

Accepted Answer

Balance sheet

Answer

The balance sheet provides a snapshot of a company's financial position at a specific date, showing assets, liabilities, and shareholders' equity.

Question 4

What is the primary indicator of a 'phantom employee' payroll fraud scheme?

Accepted Answer

Payroll records showing employees who do not actually work for the organization

Answer

Phantom employee fraud occurs when someone adds fictitious employees to the payroll and diverts the resulting paychecks, identifiable by employees on record who cannot be verified as actual workers.

Question 5

The Bank Secrecy Act (BSA) requires financial institutions to file a Suspicious Activity Report (SAR) for transactions that may involve:

Accepted Answer

Money laundering, fraud, or other criminal activity

Answer

The Bank Secrecy Act requires financial institutions to file SARs when transactions are suspected to involve money laundering, fraud, tax evasion, or other criminal activity.

(CPI) Certified Professional Investigator Practice Test

(CPI) Certified Professional Investigator Practice Test

CPI Financial Investigation & Fraud Detection 2