Verified Test Bank Complex Frauds and Financial Crimes Ch.12

CHAPTER 12

1. The common fraudster is usually depicted with the following characteristics: first-time offender, middle-aged, male, well-educated, married with children, trusted employee, in a position of responsibility, and possibly considered a “good citizen” through works in the community or through a church organization. The terminology used to refer to such a person has gravitated over time from “accidental” to ____________ fraudster.

A. “Non-accidental”

B. “Intentional”

C. “Predator”

D. “Situational”

2. A repeat offender is not a ___________ fraudster; he or she is better described as a __________.

A. Situational; predator

B. Accidental; situational fraudster

C. Predator; white collar criminal

D. White collar criminal; situational fraudster

3. ______________ crimes occur when public and private companies, nonprofits, and government entities; otherwise, legitimate and law-abiding organizations are involved in a pattern of ____________ activity.

A. Organizational; criminal

B. Corporations; suspicious

C. Situational fraudster perpetrated; unregulated

D. Predator perpetrated; financial

4. Because the activities of predators and organizational crimes are more deliberate from the outset than those of the situational fraudster, they are _______________, have more __________________, and are _________________

A. More collusive by definition; offshore banking activities; more difficult to investigate

B. Better organized; sophisticated concealment schemes; well-prepared to deal with auditors and other oversight mechanisms

C. More expensive; reach into the banking system; usually foreign entities

D. Harder to detect; offshore banking activities; complex in their internal structure

5. ______________ and ______________ include the following: money laundering associated with organized criminal activities, terrorism financing, money flows associated with drug trafficking, tax evasion, deliberate misrepresentation of an entity’s performance, and deliberate bankruptcy misreporting. Violations arising from these schemes may include money laundering, corruption, tax fraud, financial statement fraud, conspiracy, and mail and wire fraud.

A. Crime rings; drug cartels

B. Career politics; shareholder controlled corporations

C. Complex frauds; financial crimes

D. FCPA provisions; FinCen monitoring

6. A central element of complex frauds and financial crimes is that of ___________.

A. Collusion

B. Invigilation

C. A more difficult-to-follow money flow (once it goes offshore)

D. Being more sophisticated than situational fraud.

7. When collusion is in involved in complex frauds, dollar losses _________________.

A. Are usually to large to accurately estimate

B. Decrease dramatically

C. Increase dramatically

D. That are recovered by investigators can be shared among multiple jurisdictions

8. Research suggests that collusive fraud leaders are more likely to be ____________ with ___________________ and a/an _________________.

A. Individuals with accounting know-how; a C-suite position; ability to override internal controls

B. Highly respected community leaders; a graduate degree; opportunity

C. Highly educated; ego/entitlement problems; non-shareable financial problem

D. Younger males; close ties to customers or vendors; wheeler-dealer attitude

9. The primary concern when collusion is involved is that ________________ are generally ineffective in preventing fraud and other financial crimes.

A. Auditors

B. Preventive internal controls

C. Governing boards of corporate entities

D. PCAOB mandates

10. _____________ internal controls include independent checks on performance and assurance of compliance with applicable laws and regulations.

A. Research-based

B. Robust

C. Preventive

D. Detective

11. Another element of complex frauds and financial crimes is that perpetrators often mix ____________________ with _____________________.

A. Business; pleasure

B. Legitimate business activities; their unlawful transactions

C. Accounting know-how; a criminal mindset

D. Unlawfully derived funds; shell companies and offshore bank accounts

12. When conducting a complex fraud investigation, it is critical for fraud and forensic accounting professionals to be aware that a greater ___________ may exist, even if it is not recognized as a _______________.

A. Organization; legal entity

B. Scam; problem out the onset of the investigation

C. Number of players; collusive fraud

D. Underlying scam; fraud at first glance

13. One of the main challenges for examiners in complex fraud and financial crimes investigations is to ________________________________.

A. Avoid becoming a target of organized crime rings

B. Isolate the illicit activities from the legitimate activities

C. Identify specific internal controls failed to prevent it

D. Identify the true beneficial owners of shell companies

14. _______________ is an important part of the process of dismantling an organization, particularly with complex frauds or financial crimes.

A. Instituting solid internal controls

B. Identifying and convicting criminal ringleaders

C. Asset forfeiture or seizure

D. Use of case management software

15. _______________ by seizing operational assets, confiscating cash, and freezing funds is an effective tool for forensic professionals in pursuit of their responsibilities.

A. Dismantling the organization

B. Concluding a complex fraud investigation

C. Sending clear message to criminals occurs

D. Increasing the materiality threshold of an audit

16. Financial statement fraud is, more often than not, _______________.

A. A function of organized crime

B. Usually involves rank-and-file employees as opposed to this in the c-suite

C. Against the law

D. A complex fraud

17. Corruption is __________ by its very nature and tends to be _________.

A. Situational; organized

B. Unlawful; situational

C. Collusive; predatory

D. Organized; situational

18. The USA Patriot Act prohibits U.S. financial institutions from allowing correspondent account transactions with __________________.

A. Banks located in countries on the FCPA watchlist

B. Offshore banks

C. Shell banks

D. Money Service Businesses (MSBs)

19. ______________ is one of the workhorses of federal white-collar prosecutions and is available, among other statutes, to investigate and prosecute complex frauds and financial crimes.

A. The DOJ

B. Mail fraud

C. Wire fraud

D. The Bank Secrecy Act (1970)

20. ____________ is the act of engaging in criminal activity as a structured group, and individuals in organized criminal organizations are often prosecuted for it under RICO.

A. Racketeering

B. Collusion

C. Predation

D. Organized crime

21. With respect to terrorist groups and money, the goal of fraud examiners and financial forensic professionals is to _______________ the international banking system.

A. Gain the cooperation of

B. Intercept wire deposits made in

C. Deny them access to

D. Track their investment activities in

22. Islamic terrorists have been known to use less restrictive overseas banks, or informal banking systems known as __________ to smuggle cash.

A. Adab

B. Hawala

C. Riba

D. Barzakh

23. Similar to the fraud triangle for the situational fraudster, the _______________ is necessary as a precursor set of conditions for terrorist activities to exist.

A. “organized crime fraud triangle”

B. “terrorism triangle”

C. “middle east triangle"

D. “collusive organizations triangle”

24. _________________ is, essentially, any activity designed to hide the nature, location, source, ownership, or control of proceeds used for, or derived from, criminal activity. Any time an examiner sees evidence consistent with this definition, a money laundering issue may exist.

A. Conversion

B. Concealment

C. Organized crime

D. Money laundering

25. Money is ________________ can be easily transferred between individuals or entities, and that most persons would accept as an item of value or as a form of payment for goods, services, and debts owed.

A. Anything of value that

B. The root of fraud when it

C. A tracking problem when it

D. Necessary for terrorism and it

26. The process of laundering money relies upon movement and takes place in three distinction stages:

A. Depositing, structuring, withdrawing

B. Non-shareable pressure, opportunity, rationalization

C. Placement, layering, integration

D. The act, concealment, conversion

27. From the perpetrator’s perspective, the main issue with ____________ is ensuring that the source of the money and transaction itself appear to be legitimate.

A. Placement

B. Integration

C. Concealment

D. Collusion

28. A conspiracy involves three elements: (1) the co-conspirators must have an agreement (actus reus) between them, (2) the co-conspirators must act or demonstrate in inclination to commit a crime, and (3) _____________________________________.

A. The participants must mentally commit to the act through their state of mind (mens rea or intent)

B. The co-conspirators must have an active plan toward committing an SUA (ut actio)

C. The co-conspirators must demonstrate a collusive will (actum pra varicatione)

D. The participants have to possess prior knowledge that their intended act was unlawful (prior scientia)

29. ________________, went into effect on October 28, 2004. This Act effectively allows the first bank to touch a check to image the front and back of the check and then shred the original. Fraud examiners will have access to the electronic images that can serve as evidence.

A. Check Clearing for the 21st Century Act

B. The USA Patriot Act

C. The Bank Secrecy Act

D. The Know Your Customer Act (KYC)

30. With regard to the movement of money (value), the three V’s are important: volume, ___________, and venue.

A. Variety

B. Verve

C. Velocity

D. Valuation

31. _________________ offer an alternative to banks for both financial services and money laundering. This industry includes check cashers, money transmitters, foreign exchange dealers, and sellers of money orders, stored value products, and travelers’ checks.

A. Casinos

B. Shell banks

C. Credit unions

D. Money Service Businesses (MSBs)

32. ______________ is the process by which criminals use a legitimate trade to disguise their criminal proceeds from their unscrupulous sources.

A. Informal Value Transfer System (IVTS)

B. Attempts to avoid OFAC (Office of Foreign Assets Control)

C. Trade-Based Money Laundering (TBML)

D. Using prepaid Access Devices

33. Lack of transparency of ___________________ can be a desirable characteristic for some legitimate uses of shell companies, but it is also an attribute that can make some shell companies ideal vehicles for money laundering and other illicit financial activity.

A. Offshore banking

B. Beneficial ownership

C. Country of origin

D. High net-worth individuals

34. The primary distinction in whether an individual has committed tax fraud or simply committed an error is ______________________________________.

A. The intent of the individual

B. Whether the return was mailed or filed electronically

C. The knowledge (accountant) of the person filing it

D. Documentation

All bankruptcy cases are filed at the _____________________________.

A. State Bankruptcy Commission in which the person or entity resides

B. State court level in which the person or entity resides

C. Local courthouse in which the person or entity resides

D. Local district of the U.S. Bankruptcy Court

35. Bankruptcy crimes are investigated by the _____________ and prosecuted by the _____________, if warranted.

A. IRS; U.S. Treasury

B. FBI; U.S. Attorney’s Office

C. State Attorney General; state Bankruptcy Commission

D. FinCen Criminal Division; U.S. Bankruptcy Court

36. ___________ is the excessive sale of securities by a broker for the purposes of generating commissions.

A. Churning

B. Flipping

C. Round trip transacting

D. Front running