Chapter 8 Verified Test Bank Crime In The Economic System - Complete Test Bank | White Collar Crime 3e by Payne by Brian K. Payne. DOCX document preview.
Chapter 8: Crime in the Economic System
Test Bank
Multiple Choice
- What are crimes in the economic system usually classified as?
- investment fraud
- computer crimes
- economic crimes
- market manipulation
Learning Objective: 8-1: Define the makeup of the economic system.
Cognitive Domain: Knowledge
Answer Location: Crime in the Economic System
Difficulty Level: Easy
- When an offender convinced people to invest in gold that did not actually exist,
what type of investment fraud was committed?
- front running
- Ponzi scheme
- commodities fraud
- securities fraud
Learning Objective: 8-2: Explain the difference between securities and commodities and the type of fraud committed in these economic systems.
Cognitive Domain: Application
Answer Location: Investment Fraud
Difficulty Level: Medium
3. When officials pump up the prices of stocks by sharing false information online and then subsequently sell their own stocks at a higher price, what crime have they committed?
- insider trading
- futures trading fraud
- front running
- market manipulation
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Comprehension
Answer Location: Market Manipulation
Difficulty Level: Medium
4. Which type of crime is believed to be pervasive in the natural energy industry?
- market manipulation
- insider trading
- securities fraud
- futures trading fund
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Comprehension
Answer Location: Market Manipulation
Difficulty Level: Medium
5. Imagine you are taking a test in a class where one classmate was able to access the test questions ahead of time through a friend. What type of crime in the economic system is this analogy most similar to?
- manipulation
- insider trading
- broker fraud
- futures trading fund
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Application
Answer Location: Insider Trading
Difficulty Level: Medium
6. What type of crime do prearranged trading and bucketing fall under?
- market manipulation
- insider trading
- broker fraud
- futures trading fund
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Comprehension
Answer Location: Futures Trading Fraud
Difficulty Level: Medium
7. If an offender convinces an investor to invest on the promise that funds are backed by the Federal Reserve when in fact there is no backing for these funds, what type of crime has been committed?
- high-yield investment schemes
- bucketing
- advanced fee fraud
- securities fraud
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Analysis
Answer Location: Foreign Exchange Fraud, High-Yield Investment Schemes, and Advanced-Fee Fraud
Difficulty Level: Medium
8. Which type of scam or fraud involves paying investors from future investors’ payments?
- bucketing
- advanced fee fraud
- Ponzi scheme
- front running
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Comprehension
Answer Location: Ponzi and Pyramid Schemes
Difficulty Level: Medium
9. Which of the following is a red flag warning of a Ponzi scheme?
- Complicated statements are sent to investors regularly.
- Unusually high returns occur from time to time.
- Investors receive high returns consistently.
- Trading strategies are disclosed to investors.
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Comprehension
Answer Location: Ponzi and Pyramid Schemes
Difficulty Level: Medium
10. An offender working with a network of conspirators to commit crimes is an example of what pattern typical in investment fraud?
- white-collar gangs
- diminished effectiveness of stock market
- negative consequences
- high press attention
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Comprehension
Answer Location: Patterns Surrounding Investment Fraud
Difficulty Level: Medium
11. Market manipulation by energy companies is restricted under which statute?
- Energy Exchange Act
- Energy Independence and Security Act of 2007
- Energy Regulation Act of 2005
- Oil and Energy Policy Act of 2007
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Comprehension
Answer Location: Market Manipulation
Difficulty Level: Medium
12. How does banking fraud differ from investment fraud?
- Individuals engage in fraudulent behaviors to take money from a bank.
- Bank offenders conspire to commit fraud against their large corporate clients.
- Banking offenses include committing a broad range of investment fraud.
- Executives in the banking industry commit mostly securities fraud.
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Banking Fraud
Difficulty Level: Medium
13. What do pyramid and Ponzi schemes have in common?
- Investors must recruit other people to participate in order to make money.
- People who organize the schemes rarely communicate with investors.
- Investors receive information on investment strategies which builds trust
in the schemes.
- Payments made to investors come from new participants in the schemes.
Learning Objective: 8-3: Summarize the various types of investment fraud
Cognitive Domain: Comprehension
Answer Location: Ponzi and Pyramid Schemes
Difficulty Level: Medium
14. Which type of fraud occurs when individuals purchase a home they don’t plan to live in and then deed the home over to another person who plans to live there?
- flipping
- straw buyer fraud
- qualification's fraud
- reverse mortgage fraud
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Mortgage Fraud
Difficulty Level: Medium
15. Which type of mortgage fraud involves investors convincing financially distressed homeowners to “hire” them to buy the home?
- real estate agent fraud
- equity skimming
- foreclosure rescue scams
- reverse mortgage fraud
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Mortgage Fraud
Difficulty Level: Medium
16. What type of fraud do builders commit?
- They fraudulently report higher costs for building materials to increase the
selling price of the home.
- Promised extra features to the home are not included when the home is
completed by the builder, increasing their profit on the home.
- They offer excessive incentives to buyers that are not reported to
the lender to increase their profit.
- They use lower quality building materials to decrease costs of building the
home and increase their profit.
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Mortgage Fraud
Difficulty Level: Medium
17. In 2014 the U.S. Department of Education offered what conclusion about
student loan fraud between 2009 and 2012?
- Loan fraud initiated by higher education institutions increased dramatically.
- An estimated $187 million was lost to student aid fraud rings.
- The number of fraudulent applications by students decreased.
- Student aid fraud rings began to operate.
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Student Loan Fraud
Difficulty Level: Medium
18. What separates illegal flipping and legitimate fixing and reselling of houses?
- Foreclosed homes are appraised at a low price and resold at a higher price.
- The actual costs to renovate a home are inflated to increase the home’s
selling price.
- An individual home is bought and resold multiple times at inflated prices.
- Renovated homes are resold with few changes.
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Mortgage Fraud
Difficulty Level: Medium
19. Fraudulent home improvement scams fall under what category of fraud?
- builder initiated schemes
- real estate agent fraud
- straw buyer fraud
- reverse mortgage fraud
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Mortgage Fraud
Difficulty Level: Medium
20. When appraisers intentionally do not conduct a thorough determination of a home’s value, they are committing what type of fraud?
- inflated appraisal
- windshield appraisal
- conspiracy appraisal
- deflated appraisal
Ans: B
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Banking Fraud
Difficulty Level: Medium
21. When does a short sale of a foreclosed home become mortgage fraud?
- When an agent convinces a bank to sell the home at a loss and uses a
co-conspirator to buy the house at a significantly higher price.
- When the owner of the home cannot carry the mortgage and asks the bank to
allow the owner to sell it at a loss to a new buyer who pays a higher price.
- When a seller sells the home to another bank before the lender can foreclose.
- When the buyer refuses to pay the mortgage and sells the house at a lower
price than the original mortgage.
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Mortgage Fraud
Difficulty Level: Medium
22. What is a common pattern shared by mortgage and investment offenders?
- An offender is involved with a network of participants to commit fraud.
- The offense is against other parts of the economic system.
- Both types of fraud are committed over a short period of time.
- There are few consequences when an offender is caught.
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Patterns Surrounding Mortgage Fraud
Difficulty Level: Medium
23. Which of the following is a warning sign for mortgage fraud?
- low appraisals
- increased commissions for brokers
- using different appraisers
- rundown homes
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Mortgage Fraud
Difficulty Level: Medium
24. An agent who fails to pay off a homeowner’s original mortgage at closing by keeping the money instead of sending the funds to the lending institution is committing what type of fraud?
- equity skimming
- foreclosure rescue fraud
- reverse mortgage fraud
- straw buyer fraud
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Mortgage Fraud
Difficulty Level: Medium
25. Chunking and churning are types of mortgage fraud that involve what type of real estate activity?
- renovating a home and reselling it
- buying and selling multiple homes
- home improvement
- closing on a home
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Mortgage Fraud
Difficulty Level: Medium
True/False
- Social networking sites, like Facebook, relate to and offer five different
opportunities for white-collar crime.
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Comprehension
Answer Location: Introduction
Difficulty Level: Medium
- Crimes in the economic system are generally classified as investment fraud
and banking fraud.
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Comprehension
Answer Location: Crime in the Economic System
Difficulty Level: Medium
- The Commodity Exchange Act calls upon the Federal Trade Commission to
treat market manipulations by petroleum and oil company insiders as false and deceptive business practices that could be subjected to fines of up to one million dollars
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Comprehension
Answer Location: Market Manipulation
Difficulty Level: Medium
- Students became targets for student aid fraud as the demand for a college
education increases.
Learning Objective: 8-5: Describe how student loan fraud and the ways it occurs. Cognitive Domain: Comprehension
Answer Location: Student Loan Fraud
Difficulty Level: Medium
- In a Ponzi scheme, the victim rarely interacts with the creator of the scheme.
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Comprehension
Answer Location: Ponzi and Pyramid Schemes
Difficulty Level: Medium
- Vandalism is a consequence of mortgage fraud usually faced by businesses
forced to shut down.
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Consequences of Mortgage Fraud
Difficulty Level: Medium
- Exclusively using one appraiser can be a warning sign of mortgage fraud.
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Analysis
Answer Location: Mortgage Fraud
Difficulty Level: Medium
- For straw buying schemes to be successful, appraisers must provide inflated
appraisals.
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Analysis
Answer Location: Mortgage Fraud
Difficulty Level: Medium
- Misrepresenting pre-loan counseling can be a type of reverse mortgage fraud.
Learning Objective: 8.4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Mortgage Fraud
Difficulty Level: Medium
- Student loan fraud is often committed by students themselves by taking out
college loans knowing that they don’t plan to attend.
Learning Objective: 8-5: Describe how student loan fraud occurs.
Cognitive Domain: Comprehension
Answer Location: Student Loan Fraud
Difficulty Level: Medium
Short Answer
- Describe the difference between market manipulation and insider trading.
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Analysis
Answer Location: Market Manipulation
Difficulty Level: Medium
- List and define one type of futures trading fraud.
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Comprehension
Answer Location: Futures Trading Fraud
Difficulty Level: Medium
- List one of the two factors that enabled Bernie Madoff to continue running his
Ponzi scheme for more than 17 years.
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Comprehension
Answer Location: Ponzi and Pyramid Schemes
Difficulty Level: Medium
- Define “white-collar gangs.”
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Comprehension
Answer Location: Patterns Surrounding Investment Fraud
Difficulty Level: Medium
- List three types of fraudulent activities that occur under reverse mortgage
fraud.
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Mortgage Fraud
Difficulty Level: Medium
Essay
- Define and discuss three types of investment fraud.
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Analysis
Answer Location: Foreign Exchange Fraud, High-Yield Investment Schemes, and Advanced-Fee Fraud
Difficulty Level: Medium
- Discuss the differences between a Ponzi and pyramid scheme.
Learning Objective: 8-3: Summarize the various types of investment fraud.
Cognitive Domain: Analysis
Answer Location: Ponzi and Pyramid Schemes
Difficulty Level: Medium
- Describe the two types of builder-initiated fraud.
Learning Objective: 8-4: Describe the types of mortgage fraud and how these crimes are committed.
Cognitive Domain: Comprehension
Answer Location: Mortgage Fraud
Difficulty Level: Medium
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Complete Test Bank | White Collar Crime 3e by Payne
By Brian K. Payne