PCI Financial Investigation & Asset Recovery Flashcards

What is 'lapping' as a financial fraud scheme?

Answer: Stealing payments from one account and covering it with funds from another

Lapping is a scheme where an employee steals a payment from one customer and then uses subsequent payments from other customers to cover the shortfall.

What is 'ghost employee' fraud?

Answer: Adding fictitious employees to the payroll to divert funds

Ghost employee fraud involves adding fictitious persons to the payroll so that fraudsters can collect their wages.

What does 'net worth analysis' reveal in a financial investigation?

Answer: Changes in an individual's assets and liabilities that may indicate unexplained income

Net worth analysis compares a subject's known income to changes in assets and liabilities, revealing income that cannot be explained by legitimate sources.

In embezzlement cases, what is the significance of Benford's Law?

Answer: Naturally occurring numbers follow a predictable distribution that fraud can disrupt

Benford's Law states that in legitimate datasets the leading digit follows a specific distribution, and deviations from this pattern may indicate fraudulent data manipulation.

What is the primary purpose of a forensic accounting examination in an investigation?

Answer: To analyze financial records to detect fraud, embezzlement, or other financial crimes

Forensic accounting applies accounting and investigative skills to analyze financial records in the context of legal proceedings or investigations.

What is a Ponzi scheme?

Answer: A fraudulent investment operation where returns are paid from new investor funds rather than profits

A Ponzi scheme pays returns to earlier investors using money from newer investors rather than actual profits, eventually collapsing when new investment dries up.