CrFA Money Laundering & Asset Tracing 2

Question 1

In asset tracing, the 'net worth method' is used to:

Accepted Answer

Calculate unexplained increases in a subject's wealth over time

Answer

The net worth method compares a subject's beginning and ending net worth and accounts for known income and expenditures; unexplained increases suggest unreported income from illegal sources.

Question 2

Which of the following best describes 'tracing' as used in forensic accounting asset investigations?

Accepted Answer

Following the movement of specific funds through financial transactions to establish their origin or destination

Answer

Tracing involves following the paper trail of specific funds through a series of transactions to identify the source, movement, and ultimate destination of money.

Question 3

A shell company used in a money laundering scheme is best characterized as:

Accepted Answer

A legal entity with no significant assets or operations used to obscure ownership

Answer

Shell companies are legal entities that have no genuine business activities but are used to disguise the true ownership of assets and obscure the paper trail of illicit funds.

Question 4

When tracing assets through real estate transactions, forensic accountants should pay particular attention to:

Accepted Answer

All-cash purchases and rapid property flipping

Answer

All-cash real estate purchases (avoiding bank scrutiny) and quick resales at potentially inflated prices are classic indicators of real estate-based money laundering.

Question 5

The 'expenditures method' in asset tracing involves:

Accepted Answer

Calculating total unexplained expenditures to infer unreported income

Answer

The expenditures method calculates all known personal or business spending; when total expenditures exceed documented income sources, the difference suggests unreported income.

CrFA - Certified Forensic Accountant Practice Test

CrFA - Certified Forensic Accountant Practice Test

CrFA Money Laundering & Asset Tracing 2