FBI FBI Financial Crimes and Money Laundering 2 — Questions and Answers
Question 1: What is the defining characteristic of a Ponzi scheme?
- Using investor funds to buy undervalued real estate that is resold at inflated prices
- Paying returns to earlier investors using capital from newer investors rather than actual profits (Correct answer)
- Manipulating stock prices through coordinated buying and selling by insiders
- Laundering criminal proceeds through legitimate business revenue streams
Correct answer: Paying returns to earlier investors using capital from newer investors rather than actual profits
A Ponzi scheme pays earlier investors using funds contributed by new investors, creating the illusion of legitimate investment returns while generating no actual profit from investment activity.
Question 2: How does a 'pump and dump' securities fraud scheme operate?
- Artificially deflating a competitor's stock price to acquire the company at a discount
- Inflating a stock's price through false promotional statements, then selling shares at the peak before the price collapses (Correct answer)
- Illegally using insider information to trade shares before a public corporate announcement
- Manipulating commodities futures contracts through coordinated trading activity
Correct answer: Inflating a stock's price through false promotional statements, then selling shares at the peak before the price collapses
In a pump and dump scheme, fraudsters artificially inflate (pump) a stock's price using misleading promotions, then sell (dump) their own shares at the peak, causing the price to collapse and leaving other investors with significant losses.
Question 3: How does the FBI distinguish 'mortgage fraud for profit' from 'mortgage fraud for housing'?
- Fraud involving commercial properties versus residential properties
- Fraud committed by real estate professionals versus fraud committed by homebuyers
- Industry insiders conspiring to steal equity or obtain fraudulent loans versus borrowers misrepresenting information to qualify for a loan (Correct answer)
- Federal mortgage fraud prosecutions versus state-level mortgage fraud cases
Correct answer: Industry insiders conspiring to steal equity or obtain fraudulent loans versus borrowers misrepresenting information to qualify for a loan
Mortgage fraud for profit involves industry insiders such as appraisers, agents, and lenders conspiring to fraudulently obtain loan proceeds, while mortgage fraud for housing involves borrowers misrepresenting income or assets to qualify for a mortgage they otherwise couldn't obtain.
Question 4: What is 'wire fraud' under 18 U.S.C. § 1343, and what must prosecutors prove?
- Unauthorized electronic hacking of financial computer systems to steal money
- A scheme to defraud using interstate wire communications such as phone, internet, or television (Correct answer)
- Fraudulent transfer of funds between bank accounts using wire transfer protocols
- Interception of electronic communications to obtain financial account credentials
Correct answer: A scheme to defraud using interstate wire communications such as phone, internet, or television
Wire fraud requires proof of a scheme to defraud and the use of interstate wire communications (phone calls, emails, internet, radio, or TV) in furtherance of that scheme; the wire communication need not be the fraudulent act itself.
Question 5: What is a 'bust-out' fraud scheme?
- Breaking into retail stores to steal credit card processing terminals
- Using stolen credit cards to purchase electronics that are quickly resold for cash
- Establishing credit, maximizing credit lines through purchases or cash advances, then defaulting without payment (Correct answer)
- Installing skimming devices on ATMs to clone credit card information
Correct answer: Establishing credit, maximizing credit lines through purchases or cash advances, then defaulting without payment
A bust-out scheme involves establishing or hijacking credit accounts, deliberately running up maximum credit limits through merchandise purchases or cash advances, then defaulting on all payments while converting the obtained assets to cash.
Question 6: What is 'advance fee fraud' (commonly known as a 419 scheme)?
- Illegally charging upfront fees for financial services regulated by federal law
- Tricking victims into paying fees in advance for a promised large financial reward that never materializes (Correct answer)
- Requiring illegal deposits before providing fraudulent loan approvals
- Collecting application fees for non-existent employment opportunities
Correct answer: Tricking victims into paying fees in advance for a promised large financial reward that never materializes
Advance fee fraud (named after Section 419 of the Nigerian Criminal Code) tricks victims into paying upfront fees for taxes, legal costs, or processing in exchange for a promised larger sum—such as an inheritance or lottery prize—that never exists.
Question 7: Why does the FBI classify elder financial fraud as a priority investigation area?
- Federal law mandates minimum prosecution quotas for elder fraud cases
- Elderly individuals often have significant accumulated savings, may be cognitively vulnerable, and frequently underreport victimization (Correct answer)
- Elder fraud cases typically involve larger dollar amounts than other financial crimes
- International treaties require member nations to prioritize elder financial crime prosecution
Correct answer: Elderly individuals often have significant accumulated savings, may be cognitively vulnerable, and frequently underreport victimization
The FBI prioritizes elder financial fraud because seniors often have substantial retirement savings, may be more trusting or cognitively susceptible to manipulation, and frequently fail to report victimization due to embarrassment or fear of losing independence.
FBI FBI Financial Crimes and Money Laundering 2
What is the defining characteristic of a Ponzi scheme?