Tracing Illicit Transactions *

Question 1

Which of the following is the best definition of the indirect method of tracing financial transactions?

A. Using bank records and financial statements to identify and analyze information about the target’s personal characteristics to identify sources of hidden wealth or assets

B. Using financial analysis to discover all significant expenses the target incurred during the relevant period to develop the financial profile

C. Using circumstantial evidence to analyze the relationship between a suspect’s receipt and subsequent disposition of funds or assets

D. Using the subject’s books and records to analyze the relationship between the subject’s receipt and subsequent disposition of funds or assets

Answer 1

C. Using circumstantial evidence to analyze the relationship between a suspect’s receipt and subsequent disposition of funds or assets

Generally, fraud examiners can trace illicit transactions using a direct method or an indirect method. An indirect method employs circumstantial evidence to analyze the relationship between a suspect’s receipt and subsequent disposition of funds or assets. In contrast, a direct method uses the subject’s books and records (or financial transaction records belonging to third parties) to analyze the relationship between a suspect’s receipt and subsequent disposition of funds or assets.

Question 2

Which of the following is a method of tracing illicit funds in which deposits to financial institutions are compared to legitimate income?

A. Installment transaction analysis method

B. Asset method

C. Income correlation method

D. Bank deposit analysis method

Answer 2

D. Bank deposit analysis method

The bank deposits method is a method of tracing illicit funds in which deposits to financial institutions are compared to legitimate income.

The asset method is another method of tracing illicit funds, but it involves identifying assets previously acquired, identifying current liabilities, and taking the difference between the two.

The installment transaction analysis method and the income correlation method are not methods of tracing illicit funds.

Question 3

Which of the following would be the most successful method of proving illicit income when several of the subject’s assets or liabilities have changed during the period under examination and the subject’s financial records are not available?

A. Benford’s method of analysis

B. Attribute method of analysis

C. Net-worth method of analysis

D. Sampling sources method of analysis

Answer 3

C. Net-worth method of analysis

The net-worth method (or comparative net-worth analysis) is used to prove illicit income circumstantially by showing that a person’s assets or expenditures for a given period exceed that which can be accounted for from known or admitted legitimate sources of income. Fraud examiners should use the net-worth method when several of the subject’s assets or liabilities have changed during the period under examination and when the target’s financial records are not available.

Question 4

Which of the following is LEAST likely to be revealed by analyzing a subject’s electronic payment records?

A. The funds the subject has tied up in real property

B. Assets the subject has purchased

C. The locations of the subject’s residences and businesses

D. Loans the subject has obtained

Answer 4

A. The funds the subject has tied up in real property

Electronic payments (or e-payments) refer to any type of non-cash payment that does not involve a paper check. Electronic payment records can reveal, among other things:
• Assets the subject has purchased
• The locations of the subject’s assets (e.g., through the payment of real estate taxes, broker’s fees, or utility payments)
• The locations of the subject’s residences and businesses (e.g., through analyzing the payments of utility bills)
• Loans the subject has obtained (e.g., through analyzing loan payments)
• Payments made to nonexistent employees with direct deposit
• The cities and countries in which the subject conducts business (e.g., through analyzing the payments for carrier services to deliver packages)
• Assets ostensibly owned by family members or close associates but effectively controlled, held, or gifted by the subject
• Hotel payments
• The true owner of a property (e.g., through analyzing the mortgage payments and payments for home owner insurance)

Question 5

Which of the following is the term that refers to the net amount a lender disburses to a borrower under the terms of a loan agreement?

A. Loan principal

B. Loan disbursement

C. Loan proceeds

D. Loan curtailment

Answer 5

C. Loan proceeds

If a fraud examination involves a loan with proceeds that have been disposed, the fraud examiner should trace the disposition of the loan’s proceeds. Loan proceeds refer to the net amount a lender disburses to a borrower under the terms of a loan agreement.

Question 6

Suppose you need to prove a suspect’s illicit income circumstantially. Which of the following methods of tracing assets would yield the best result when the suspect is using his illicit funds to accumulate wealth and acquire assets, thus causing his net worth to increase?

A. The income correlation method

B. The bank deposits method

C. The expenditures method

D. The asset method

Answer 6

D. The asset method

The asset method, the expenditures method, and the bank deposits method can all be used to establish a subject’s sources of income using circumstantial proof.

The asset method allows the fraud examiner to prove income circumstantially by showing that the subject’s assets for a given period exceed those that can be accounted for from known or admitted sources of income. Fraud examiners should use the asset method when it is suspected that the subject has accumulated wealth and acquired assets with illicit proceeds, which causes the subject’s net worth—the difference between a person’s assets and liabilities at a particular point in time—to increase.

The expenditures method (also known as the sources and application of funds method) compares the suspect’s known expenditures and known sources of funds during a given period of time. That is, this analysis seeks to quantify the cost of the subject’s lifestyle and determine whether the subject’s reported income is sufficient to support his lifestyle. The expenditures method is best used when the subject spends illicit income on consumables (such as travel and entertainment) that would not cause an increase in net worth.

The bank deposits method of tracing illicit funds is recommended as a primary method of proof when most of the subject’s income is deposited and the subject’s books and records are unavailable, withheld, incomplete, or maintained on a cash basis.

The income correlation method is not a method of tracing illicit funds.

Question 7

When tracing financial transactions, the method that involves using the subject’s books and records to analyze the relationship between the subject’s receipt and subsequent disposition of funds or assets is called which of the following?

A. The bank records method

B. The direct method

C. The indirect method

D. The asset method

Answer 7

B. The direct method

Generally, fraud examiners can trace illicit transactions using a direct method or an indirect method. A direct method uses the subject’s books and records (or financial transaction records belonging to third parties) to analyze the relationship between a suspect’s receipt and subsequent disposition of funds or assets. In contrast, an indirect method employs circumstantial evidence to analyze the relationship between a suspect’s receipt and subsequent disposition of funds or assets.

Question 8

Suppose you need to prove a suspect’s illicit income circumstantially. Which of the following methods of tracing assets would yield the best result when the suspect is spending his illicit funds on items that would not cause an increase in net worth, such as travel and entertainment?

A. The income correlation method

B. The asset method

C. The bank deposits method

D. The expenditures method

Answer 8

D. The expenditures method

The expenditures method (also known as the sources and application of funds method) compares the suspect’s known expenditures and known sources of funds during a given period of time. That is, this analysis seeks to quantify the cost of the subject’s lifestyle and determine whether the subject’s reported income is sufficient to support his lifestyle. The expenditures method is best used when the subject spends illicit income on consumables (such as travel and entertainment) that would not cause an increase in net worth.

Question 9

What is mutual legal assistance (MLA)?

A. A formal request by the government of a country seeking information from a defendant residing in another country

B. A formal request by the courts of one country seeking judicial assistance from the courts of another country

C. A process by which countries request and provide assistance in law enforcement matters

D. A letter whereby a criminal defendant requests that the government release exculpatory information

Answer 9

C. A process by which countries request and provide assistance in law enforcement matters

Mutual legal assistance (MLA) is a process by which countries request and provide assistance in law enforcement matters, such as gathering information, obtaining provisional remedies, and enforcing foreign orders and judgments. To obtain assistance from a foreign government, the government seeking assistance makes an MLA request. An MLA request is a written request to the government of a foreign country that is used to obtain assistance in law enforcement matters. Generally, MLA can be used to obtain assistance in matters such as conducting searches, gathering evidence, compelling sworn testimony and the production of documents, issuing search warrants, issuing subpoenas, serving process, exchanging affidavits, obtaining provisional remedies, and providing assistance in forfeiture proceedings.

Question 10

The expenditures method (also known as the sources and application of funds method) for proving illicit income involves identifying all assets held by the subject that were acquired earlier, identifying the amount of the subject’s current liabilities, and taking the difference between the two values. T/F

Answer 10

False
The expenditures method (also known as the sources and application of funds method) compares the suspect’s known expenditures and known sources of funds during a given period of time. That is, this analysis seeks to quantify the cost of the subject’s lifestyle and determine whether the subject’s reported income is sufficient to support his lifestyle. The expenditures method is best used when the subject spends illicit income on consumables (such as travel and entertainment) that would not cause an increase in net worth.

Identifying assets previously acquired, identifying current liabilities, and taking the difference between the two is the process involved in the asset method, not the expenditures method.

Question 11

Which of the following is an example of an indirect method of locating assets or tracing illicit funds?

A. Net-worth analysis

B. The specific-items method

C. Correlation analysis

D. Financial condition analysis

Answer 11

A. Net-worth analysis
Often, when a fraud examiner must locate a subject’s assets or trace illicit funds, the subject’s books and records are not made available. In such cases, the fraud examiner must use an indirect approach, such as net-worth analysis or the bank deposit analysis method, to prove income.

Question 12

Which of the following is the most accurate description of the net-worth (or comparative net-worth) method of analysis?

A. The net-worth method is an indirect method of proving illicit income circumstantially by measuring and recording income as earned and recording expenses as incurred.

B. The net-worth method refers to the process of using a subject’s books and records to determine the subject’s financial condition and identify the receipt or disposition of funds or assets.

C. The net-worth method is an indirect method of proving illicit income circumstantially by showing that a person’s assets or expenditures for a given period exceed that which can be accounted for from known or admitted legitimate sources of income.

D. The net-worth method refers to the process of assigning forecasted income and expenses to accounts, which will be compared to actual income and expenses for analysis of variances.

Answer 12

C. The net-worth method is an indirect method of proving illicit income circumstantially by showing that a person’s assets or expenditures for a given period exceed that which can be accounted for from known or admitted legitimate sources of income.

The net-worth method (or comparative net-worth analysis) is used to prove illicit income circumstantially by showing that a person’s assets or expenditures for a given period exceed that which can be accounted for from known or admitted legitimate sources of income. Fraud examiners should use the net-worth method when several of the subject’s assets or liabilities have changed during the period under examination and when the target’s financial records are not available.

Question 13

Which of the following pieces of information is NOT usually contained on the signature card of a personal bank account?

A. The thumbprint of the person opening the account

B. The telephone number of the person opening the account

C. The identification number of the person opening the account

D. The address of the person opening the account

Answer 13

A. The thumbprint of the person opening the account

The signature card is a source of valuable information. Although its form varies, the card usually contains the person’s name, address, telephone number, identification number (e.g., Social Security number), amount of opening deposit (and possibly the source of opening deposit), and security data (e.g., mother’s maiden name). The person’s identification information might be significant, especially if the depositor used an alias. Also, a fraud examiner might be able to trace the opening deposit through the bank’s records to disclose a source of income.

While a bank signature card contains several important pieces of identifying information, it typically does not contain the fingerprints of the account holder.

Question 14

Turnbull, a fraud victim, hired Kennedy, a CFE, to trace a fraudster’s assets to facilitate the recovery of the illicit proceeds obtained by the fraudster. Which of the following typically will be the MOST useful source of information for Kennedy in his efforts to trace the fraudster’s assets?

A. Third-party witnesses

B. The fraudster’s bank records

C. Surveillance footage

D. The fraudster’s paystubs

Answer 14

B. The fraudster’s bank records

Records obtained from financial institutions are perhaps the single most important financial source available to a fraud examiner for asset-tracing purposes. They can be used as evidence for fraud, as well as to:
• Identify witnesses and other evidence.
• Uncover criminal profits.
• Identify criminal assets.
• Locate assets that can be used to satisfy a judgment.
• Identify localities where assets are stored.
• Determine the lifestyle of an account holder.
• Determine the financial health of an organization.
• Determine the source of funds placed into an account.
• Determine the use of the funds from an account.

Question 15

Which of the following is a step in the general process for tracing illicit transactions?

A. Selecting a response team

B. Building a financial profile

C. Establishing reporting protocols

D. Implementing litigation hold procedures

Answer 15

B. Building a financial profile
Although the procedures performed during a tracing investigation vary depending on the circumstances, an actual investigation to trace transactions generally should involve the following elements:
• Collect information.
• Profile the subject (i.e., assemble the personal—financial and behavioral—profile).
• Review information for leads and prioritize leads.
• Trace the illicit transactions.

Question 16

The net-worth analysis method of tracing illicit funds is recommended as a primary method of proof when most of the subject’s income is deposited in a financial institution and the subject’s books and records are unavailable, withheld, incomplete, or maintained on a cash basis. T/F

Answer 16

False
The bank deposits method is recommended as a primary method of proof when most of the subject’s income is deposited in a financial institution and the subject’s books and records are unavailable, withheld, incomplete, or maintained on a cash basis.

The net-worth method of tracing assets would yield the best result when several of the subject’s assets or liabilities have changed during the period under examination and the subject’s financial records are not available.

Question 17

What is a letter rogatory?

A. A letter in which a judge in one country orders the government in another country to release a defendant from jail

B. A formal request by the courts of one country seeking judicial assistance from the courts of another country

C. A formal request by the government of a country seeking information from a defendant residing in another country

D. A letter whereby a criminal defendant requests that the government release exculpatory information

Answer 17

B. A formal request by the courts of one country seeking judicial assistance from the courts of another country

Government officials may make a formal government-to-government request for assistance, or letters rogatory, to obtain foreign evidence. Letters rogatory are formal requests that a court in one country makes to seek judicial assistance from a court in another country. Letters rogatory also permit formal communication among the judiciary, a prosecutor, or a law enforcement official of one country and their counterpart in another country. The most common types of assistance sought by letters rogatory are service of process and taking of evidence.

Question 18

When determining a subject’s net worth for asset-tracing purposes, all assets should be valued at current market value to eliminate any question about estimates. T/F

Answer 18

False

When computing a subject’s net worth, these issues should be considered:
• All assets should be valued at cost, not fair market value. Subsequent appreciation or depreciation of assets should be ignored.
• The amount of funds available to the subject from legitimate sources should be estimated or computed generously.
• The subject should be interviewed to identify all alleged sources of funds and to negate defenses that he might raise later.

Question 19

Although obtaining a check negotiated by a subject can be helpful when tracing illicit transactions, the information that can be obtained from such records is generally limited to the name of the payee, the amount of the check, and the date the check was written. T/F

Answer 19

False
Canceled checks written by a subject or received from others can provide valuable information, including the amounts, payees, and endorsees of payments made by check. This data can provide leads and help identify a subject’s assets.

Canceled checks can also lead to hidden funds. For example, the absence of a check for a recurring payment for a particular month might indicate a cash payment, which in turn would indicate possible undisclosed cash income.

Additionally, the back of canceled checks can contain many items of interest. A deposited check might show the name of the entity to whose account the money has been deposited and the account number. Also, deposited checks might contain the names of the financial institutions through which the checks traveled.

The depository stamp on a check can also identify the bank at which the check was cashed, and this information might provide a lead to another bank account.

Question 20

When circumstantial evidence is offered to prove that a subject has more income available than can be accounted for from legitimate sources, the subject often responds with which of the following defenses?

A. The subject incurred substantial debts.

B. The subject’s excess funds were received as gifts.

C. The subject has no taxable income.

D. The subject’s excess funds were deobligated.

Answer 20

B. The subject’s excess funds were received as gifts.

If a party uses an indirect method to prove the defendant’s illicit assets circumstantially, the defendant will try to rebut such evidence. Often, the defendant will claim that the excess income came from legitimate sources. The defendant might claim that the funds are cash that he accumulated earlier or cash from other legitimate sources, such as loans or gifts from relatives.

Question 21

Which of the following is LEAST likely to be revealed by analyzing a subject’s electronic payment records?

A. The locations of the subject’s assets

B. Loans the subject has obtained

C. The cities and countries in which the subject conducts business

D. If the subject is skimming employer funds

Answer 21

D. If the subject is skimming employer funds
Electronic payments (or e-payments) refer to any type of non-cash payment that does not involve a paper check. Electronic payment records can reveal, among other things:
• Assets the subject has purchased
• The locations of the subject’s assets (e.g., through the payment of real estate taxes, broker’s fees, or utility payments)
• The locations of the subject’s residences and businesses (e.g., through analyzing the payments of utility bills)
• Loans the subject has obtained (e.g., through analyzing loan payments)
• Payments made to nonexistent employees with direct deposit
• The cities and countries in which the subject conducts business (e.g., through analyzing the payments for carrier services to deliver packages)
• Assets ostensibly owned by family members or close associates but effectively controlled, held, or gifted by the subject
• Hotel payments
• The true owner of a property (e.g., through analyzing the mortgage payments and payments for home owner insurance)

Question 22

Which of the following is an indirect method of proving illicit income circumstantially by showing that a person’s assets or expenditures for a given period exceed that which can be accounted for from known or admitted legitimate sources of income?

A. Regression analysis

B. Fundamental analysis

C. Bank deposit method of analysis

D. Net-worth (or comparative net-worth) method of analysis

Answer 22

D. Net-worth (or comparative net-worth) method of analysis

The net-worth method (or comparative net-worth analysis) is used to prove illicit income circumstantially by showing that a person’s assets or expenditures for a given period exceed that which can be accounted for from known or admitted legitimate sources of income. Fraud examiners should use the net-worth method when several of the subject’s assets or liabilities have changed during the period under examination and when the target’s financial records are not available.

Question 23

Which of the following is the main purpose of conducting a net-worth analysis?

A. To prove that the subject’s assets equal his liabilities

B. To show that a subject’s actions caused a decrease in the victim’s net worth

C. To show that the subject’s assets or expenditures exceed his reported income

D. To prove that the subject purchased an asset with appreciated value

Answer 23

C. To show that the subject’s assets or expenditures exceed his reported income

The net-worth method (or comparative net-worth analysis) is used to prove illicit income circumstantially by showing that a person’s assets or expenditures for a given period exceed that which can be accounted for from known or admitted legitimate sources of income. The net-worth method is a reliable method for estimating a person’s ill-gotten gains. The method is used extensively by the Internal Revenue Service, especially in drug and money laundering cases.

Question 24

Which of the following is the most accurate statement about canceled (negotiated) checks?

A. Canceled checks written on a subject’s account can reveal other bank accounts belonging to the subject.

B. Information from canceled checks written on a subject’s account can reveal assets the subject purchased, but not the locations of the subject’s assets.

C. The information that can be obtained from canceled checks is limited to the name of the payee, the amount of the check, and the date the check was written.

D. A canceled check is a check that has been written but has yet to clear the bank on which it was drawn.

Answer 24

A. Canceled checks written on a subject’s account can reveal other bank accounts belonging to the subject.

Canceled (negotiated) checks are checks cleared by a bank or other financial institution. They can provide valuable information, including the amounts, payees, and endorsees of payments made by check. Canceled checks written on a subject’s account can also reveal assets the subject has purchased, the locations of the subject’s assets (through, for example, the payment of real estate taxes, broker’s fees, or utility payments), and information about other bank accounts belonging to the subject.

Question 25

Which of the following is the best definition of the indirect method of tracing financial transactions?

A. Using bank records and financial statements to identify and analyze information about the target’s personal characteristics to identify sources of hidden wealth or assets

B. Using financial analysis to discover all significant expenses the target incurred during the relevant period to develop the financial profile

C. Using circumstantial evidence to analyze the relationship between a suspect’s receipt and subsequent disposition of funds or assets

D. Using the subject’s books and records to analyze the relationship between the subject’s receipt and subsequent disposition of funds or assets

Answer 25

C. Using circumstantial evidence to analyze the relationship between a suspect’s receipt and subsequent disposition of funds or assets

Generally, fraud examiners can trace illicit transactions using a direct method or an indirect method. An indirect method employs circumstantial evidence to analyze the relationship between a suspect’s receipt and subsequent disposition of funds or assets. In contrast, a direct method uses the subject’s books and records (or financial transaction records belonging to third parties) to analyze the relationship between a suspect’s receipt and subsequent disposition of funds or assets.

Question 26

Net worth can be defined as the difference between assets and liabilities at a particular point in time. t/f

Answer 26

t

Net worth can be defined as the difference between assets and liabilities at a particular point in time.

Question 27

Records obtained from financial institutions are perhaps the single most important financial source available to fraud examiners for purposes of tracing assets. t/f

Answer 27

t
Records obtained from financial institutions are perhaps the single most important financial source available to fraud examiners for asset-tracing purposes. They can be used as evidence for fraud, as well as to:
Identify witnesses and other evidence.
Uncover criminal profits.
Identify criminal assets.
Locate assets that can be used to satisfy a judgment.
Identify localities where assets are stored.
Determine the lifestyle of an account holder.
Determine the financial health of an organization.
Determine the source of funds placed into an account.
Determine the use of the funds from an account.

Question 28

Which of the following is LEAST likely to be revealed by analyzing a subject’s electronic payment records?
A. The cities and countries in which the subject conducts business
B. Loans the subject has obtained
C. The locations of the subject’s assets
D. If the subject is skimming employer funds

Answer 28

D

Question 29

Which of the following terms refers to the search for evidence showing what has happened to property, identifying the proceeds of property, and identifying those who have handled or received property or the proceeds of property?
 A. Acceding	
 B. Replicating	
 C. Patterning	
 D. Tracing

Answer 29

D

Question 30

What is a letter rogatory?
A. A formal request by the government of a country seeking information from a defendant residing in another country
B. A formal request by the courts of one country seeking judicial assistance from the courts of another country
C. A letter in which a judge in one country orders the government in another country to release a defendant from jail
D. A letter whereby a criminal defendant requests that the government release exculpatory information

Answer 30

B

Question 31

Which of the following is the most accurate statement about tracing the disposition of loan proceeds?
A. Tracing loan proceeds can uncover hidden assets or unknown witnesses
B. Tracing loan proceeds can determine if hidden accounts were used for loan payments
C. Tracing loan proceeds can determine if the proceeds were deposited into hidden accounts
D. All of the above

Answer 31

D

Question 32

Suppose you need to prove a suspect’s illicit income circumstantially. Which of the following methods of tracing assets would yield the best result when the suspect is spending his illicit funds on items that would not cause an increase in net worth, such as travel and entertainment?
 A. The bank deposits method	
 B. The asset method	
 C. The income correlation method	
 D. The expenditures method

Answer 32

D

Question 33

Blue, a Certified Fraud Examiner, has just begun an interview of White. After introducing himself and establishing rapport with White, what should Blue do next?
 A. Start asking questions	
 B. Establish a transitional statement 
 C. Establish the interview theme 
 D. None of the above

Answer 33

C

Question 34

Baker, a Certified Fraud Examiner, is interviewing Green. During the interview, Baker could tell Green was becoming uncomfortable at the sensitive nature of the questions. As a general proposition, what should Baker do next?
A. Ask a nonsensitive question and return later to the sensitive questions.
B. Press on with the questions.
C. Drop the sensitive questions altogether.
D. Explain that everything said during the interview will remain confidential.

Answer 34

A

Question 35

It is recommended that any witnesses who are considered potentially volatile be interviewed without advance notice. T/F

Answer 35

T

Question 36

Black, a Certified Fraud Examiner, is interviewing a person whose truthfulness is unknown. Which of the following responses to questions posed by Black might indicate a deceptive answer?
 A. “Why would I do that?”	
 B. “What was that again?”	
 C. “I just can’t seem to remember.”	
 D. All of the above

Answer 36

D

Question 37

During the introductory portion of an interview, the interviewer must state the purpose of the interview in a general way. This is known as:
 A. Providing the introduction	
 B. Establishing rapport	
 C. Establishing the interview theme 
 D. None of the above

Answer 37

C

Question 38

As a general rule, the more intelligent the witness, the less reliable his verbal and nonverbal clues of deception will be. T/F

Answer 38

False
Conclusions concerning behavior must be tempered by a number of factors. As a general rule, the more intelligent the respondent, the more reliable verbal and nonverbal clues will be.
A higher level of intelligence breeds more consistency in responses from which deviations are more clearly recognizable. People of lower intelligence tend to be more erratic in their behavior, and thus meaningful deviations are more difficult to discern.

Question 39

The goal of establishing an interview theme should be to:
A. Declare that the interviewer suspects the respondent of wrongdoing.
B. Inform the respondent that an official inquiry is being conducted.
C. Determine the respondent’s guilt or innocence.
D. Get the respondent to make a commitment to assist before commencing serious questioning.

Answer 39

D

Question 40

Playing with a pencil while talking is an example of a displacement behavior for reducing nervousness that a subject might exhibit during an interview. T/F

Answer 40

T
Manipulators are motions like picking lint from clothing, playing with objects such as pencils, or holding one’s hands while talking. Manipulators are displacement activities that reduce nervousness.

Question 41

A \_\_\_\_\_\_\_\_\_\_\_\_\_\_ interview is one that has the potential to bring about strong emotional reactions in the respondent.
 A. Chronemic	
 B. Volatile 
 C. Evasive	
 D. None of the above

Answer 41

B

Question 42

In interview situations, a(n)\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ is an orderly, continuous account of an event or incident given by a respondent with minimal or no prompting.
 A. Unprompted script	
 B. Free narrative 
 C. Informational response	
 D. None of the above

Answer 42

B

Question 43

Which of the following is a purpose of closing questions in interview situations?
 A. To obtain additional facts	
 B. To reconfirm facts 
 C. To maintain goodwill	
 D. All of the above

Answer 43

D

Question 44

When evaluating a respondent’s behavior for signs of deception during an interview, it is important that the interviewer remember that:
A. No single behavior should be isolated and no single conclusion should be drawn from it
B. Most witnesses can hide the obvious signs of deception
C. The interviewer cannot legally accuse the witness of deception
D. None of the above

Answer 44

A

Question 45

Which of the following is the facilitator of communication that refers to rewards that are not directly related to the interview experience but that cause the respondent to see the interview as a means to an end?
 A. Altruistic rewards 
 B. Sympathetic rewards	
 C. Extrinsic rewards 
 D. Cathartic rewards

Answer 45

C
xtrinsic rewards are rewards the interviewee receives that are not directly related to the interview experience, and they cause the respondent to see the interview as a means to an end. Extrinsic rewards for interviewees can include money, job advancement, and retention of privileges. What is irrelevant to the interviewer might not be to the respondent. A sensitive interviewer will be able to recognize what extrinsic rewards the respondent receives, if any, from being interviewed.

Question 46

In interview situations, \_\_\_\_\_\_\_\_\_\_\_\_\_\_ is defined as a "relation marked by harmony, conformity, accord, or affinity."
 A. Norming	
 B. Calibration	
 C. Active listening	
 D. Rapport

Answer 46

D

Question 47

In interview situations, it is sometimes recommended that the interviewer shake hands with the respondent. What is the purpose of this?
 A. Social courtesy	
 B. To establish the interview purpose	
 C. Professional courtesy	
 D. To break down psychological barriers

Answer 47

D

Question 48

Which of the following witnesses should be interviewed by surprise?
 A. Friendly witnesses	
 B. Neutral witnesses	
 C. Volatile witnesses 
 D. None of the above

Answer 48

C
Surprise should be employed in any interview that is considered potentially volatile. In many instances, the potentially volatile respondent is unaware that he is going to be questioned, and will therefore be caught off guard. If the interview is not conducted by surprise, the interviewer runs the risk of the respondent not showing up, showing up with a witness, or being present with counsel. A target’s friends, relatives, and romantic interests often make for a difficult interview. They perceive that the fraud examiner is deliberately targeting someone close to them.

Question 49

“Aren’t you responsible for reviewing and approving your employees’ timesheets?” is an example of which of the following types of questions?
 A. Double-negative	
 B. Leading 
 C. Open	
 D. Assessment

Answer 49

B

Question 50

When a potentially deceptive interview respondent asks the interviewer to repeat a question or repeats the question himself, the respondent is usually just trying to make sure that he has fully understood the question being asked. T/F

Answer 50

False
Repeating the question is a means for a deceptive respondent to gain more time to think of what to say. The respondent might repeat the question verbatim, or he might frame the answer with a request to repeat the question (e.g., “What was that again?” or similar language). Conversely, a truthful subject usually does not have to contemplate his answer.

Question 51

There should be two interviewers involved in a potentially volatile interview. T/F

Answer 51

T
There should be two interviewers involved in potentially volatile situations. Having two people present provides psychological strength for the interviewers. Additionally, the second person can serve as a witness in the event that an interview turns bad.

Question 52

In interview situations, \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ questions are those worded in a way that makes it difficult for the respondent to answer “yes” or “no.”
 A. Monologue	
 B. Open
 C. Complex 
 D. None of the above

Answer 52

B
Open questions are those worded in a way that makes it difficult for the respondent to answer “yes” or “no.” Also, the answer to an open question is not dependent on the question. The typical open question calls for a monologue response, and it can be answered in several different ways.

Question 53

During the introductory phase of the interview, the interviewer should avoid terms such as:
 A. Investigation 
 B. Inquiry	
 C. Review	
 D. All of the above

Answer 53

A

Question 54

When people engage in conversations, including interviews, they respond automatically with expressions that have little real meaning, such as "Good morning" and "How are you today?" These kinds of expressions are called:
 A. Therapeutic	
 B. Ritualistic 
 C. Expressionistic	
 D. None of the above

Answer 54

B

Question 55

Which of the following is the facilitator of communication that refers to an individual’s need to identify with a higher value beyond immediate self-interest?
 A. Altruism 
 B. Extrinsic rewards	
 C. Catharsis	
 D. None of the above

Answer 55

A
There seems to be a need for humans to identify with some higher value or cause beyond immediate self-interest. This might take the form of identification with the objectives of some larger group. Altruistic deeds usually increase self-esteem whether or not the deeds have been made public. This distinguishes altruism from publicity. Altruism is of major importance in motivating many respondents. Interviewers who understand the respondent’s value system can use strategies and techniques that appeal to altruism.

Question 56

Sullivan is conducting an interview with Marsha, a potential co-conspirator in a fraud scheme. Throughout the interview, Marsha continuously fidgets in her chair and touches her hair, indicating that she is nervous and under stress. Based on these signs, Sullivan should conclude that Marsha is lying to him. T/F

Answer 56

False
In detecting deception during an interview, the interviewer must remember that the interviewee or target might already be under stress because of the situation. While lying and deception do indeed cause stress, it is not necessarily true that all stress exhibited during an interview is caused by lying.

Question 57

Which of the following methods can be used to obtain documentary evidence?
 A. Subpoena	
 B. Written consent	
 C. Oral consent	
 D. All of the above

Answer 57

D

Question 58

Black, a Certified Fraud Examiner, has obtained an oral confession from Green, a fraud suspect. Black wants to examine Green's bank accounts. Which of the following would be the LEAST effective way to obtain permission to examine Green's bank records?
 A. Obtain a subpoena.	
 B. Obtain a court order. 
 C. Obtain Green’s oral consent. 
 D. Obtain Green’s written consent.

Answer 58

C

Documentary evidence may be obtained in a number of ways. It is possible to obtain evidence by consent, if both parties agree. This is the preferred method. In some cases, consent can be oral, but when information is obtained from possible adverse witnesses or the target of the examination, it is recommended that the consent be in writing.
Additionally, certain types of records can be obtained by consent only if the subject of the records consents in writing. Accessing a subject’s bank records from financial institutions, for instance, requires written consent. If no consent is given and evidence is held by other parties or in uncontrolled locations, specific legal action might be required. Most often, the legal process used takes the form of a subpoena or other court order to produce the documents and records (including electronic records). Other forms of court orders can be used to obtain witness evidence and statements.

Question 59

When a fraud examiner identifies suspect indented writings on a pad of paper, he might be able to learn the text of the indentations by shining a bright-beam light at an oblique angle across the writing to reveal the shadows of the indented text. t/f

Answer 59

t

Question 60

All of the following are advantages to using data analysis software EXCEPT:
A. Fraud examiners can use data analysis software to produce accurate results from bad data.
B. Fraud examiners can use data analysis software to centralize fraud investigations. I
C. Fraud examiners can use data analysis software to search for red flags of possible fraud.
D. Fraud examiners can use data analysis software to ensure that an investigation is accurate and complete.

Answer 60

A

Question 61

Which of the following is an example of a data analysis function that can be performed to detect fraud through examination of accounts payable?
A. Select samples for asset existence verification.
B. Summarize cash disbursements by bank account.
C. Sort asset values by asset type or dollar amount.
D. Identify debits to expense accounts outside of set default accounts.

Answer 61

D

Question 62

Which of the following functions does a Benford’s Law analysis help to achieve?
A. Identifying duplicate payments
B. Measuring the relationship between items on financial statements by expressing accounts as percentages
C. Extracting usable information from unstructured text data
D. Identifying fabricated numbers

Answer 62

D
The goal of a Benford’s Law analysis is to identify fabricated numbers. Benford’s Law provides that the distribution of the digits in multi-digit natural numbers is not random; instead, it follows a predictable pattern. That is, Benford’s Law maintains that certain digits show up more than others do when dealing with natural numbers. A “1” will appear as the first non-zero digit roughly 30 percent of the time; “2” will be the leading digit almost 18 percent of the time; and “9” will lead off only 4.6 percent of the time. Moreover, “0” is most likely to be the second digit, appearing 12 percent of the time.
Many fraudsters fail to consider the non-intuitive Benford’s Law pattern when creating false documentation or transactions to cover their tracks. Consequently, testing data sets for the occurrence or non-occurrence of the predictable digit distribution can help identify included numbers that are not legitimate.

Question 63

Which of the following data analysis functions is most useful in testing for hidden journal entries?
 A. Identifying duplicates 
 B. Statistical sampling	
 C. Gap testing 
 D. Aging analysis

Answer 63

C
Gap testing is used to identify missing items in a sequence or series, such as missing check or invoice numbers. It can also be used to find sequences where none are expected to exist (e.g., employee Social Security numbers). In reviewing journal entries, gaps might signal possible hidden entries.

Question 64

During which phase of the data analysis process does the fraud examiner identify, obtain, and verify the relevant or requested data?
 A. The planning phase 
 B. The post-analysis phase	
 C. The preparation phase
 D. The testing and interpretation phase

Answer 64

C

Question 65

Undercover covert operations use disguise and deceit to obtain evidence directly from people involved in the offense, whereas surveillance operations use the skill of observation to gather information about individuals’ activity.
t/f

Answer 65

T
There are two major forms of covert operations: undercover and surveillance. Several distinctions define these two types of covert operations. Undercover operations seek to obtain evidence directly from people involved in the offense through the use of disguise and deceit. Rather than waiting for the information to come by other routes, there is a conscious decision to seek it out. In contrast, surveillance operations use the skill of observation to determine individuals’ activity. Surveillance operations are designed to gather information.
For example, a surveillance operation might involve observing a suspect from afar while he meets with a potential co-conspirator. Alternatively, the investigator might pose as the co-conspirator’s agent and engage the suspect in conversation in an attempt to gather information; this would be an example of an undercover operation.

Question 66

As long as the fraud examiner is not a government employee, promises of unqualified confidentiality for informants or sources are encouraged to get them to participate.. T/F

Answer 66

F

Question 67

Which of the following statements about bankruptcy court records is correct
A. A bankruptcy file typically contains the bankruptcy petition
B. The documents filed with a bankruptcy court are not open, public records
C. Bankruptcy documents are usually located in the state bankruptcy court for the jurisdiction where the debtor resided
D. All of the above

Answer 67

A

Question 68

Bob wants to locate Jim, a fraud suspect. Bob calls Jim’s parents posing as an old friend and asks for Jim’s address, which they give him. This act would be considered illegal pretexting in all jurisdictions.
t/f

Answer 68

f
Broadly defined, pretexting is the act of impersonating someone else or making false or misleading statements to obtain, sell, or buy information about a person or organization. Under the broad definition, pretexting for nonfraudulent purposes is not always illegal, but it should be used with caution. For example, if a fraud examiner is trying to locate a witness or a suspect, he might call the person’s relative and pretend to be an old friend who is looking for a phone number. This type of pretexting might be permissible.
However, the Gramm-Leach-Bliley Act made it a criminal offense to engage in pretexting with financial institutions. In this context, pretexting is the act of obtaining customer information from financial institutions through the use of deceptive tactics.

Question 69

Alpha, a fraud suspect, was recently divorced. Where would an investigator likely find a record of Alpha’s divorce?
A. Bureau of vital statistics in the jurisdiction where the divorce was granted
B. County court in the jurisdiction where the divorce was granted
C. Federal divorce court in the district where the divorce was granted
D. None of the above

Answer 69

B

Question 70

Which of the following types of searches is best suited for locating people using online records?
 A. Media database searches	
 B. On-site court records searches	
 C. Medical facility commitment records	
 D. Credit bureau header searches

Answer 70

D
Fraud examiners can use credit header data to locate individuals. A credit header is the information in a credit report that gives basic information about the person to whom the credit report applies, and it includes identifying information such as name, name variations, current and former addresses, telephone number, date of birth, and Social Security number.
Nearly all individuals have been involved in some credit activity, either under their true names or an assumed (“also known as”) name, and if there are no credit records for an individual, it might be because he is very young or very old.
The credit bureau headers offer two search mechanisms. First, the fraud examiner can discover a current address, an address history, and Social Security number(s) associated with the target by using a past address up to seven years old. Second, once the fraud examiner has the subject’s Social Security number, he can search the credit bureau headers for matches because the Social Security number is a national identity number. Although Social Security numbers are protected from disclosure, they sometimes end up disclosed on public records.

Question 71

The Securities and Exchange Commission (SEC) maintains which of the following types of information on corporations whose stocks and securities are sold to the public?
A. Identities of accountants and attorneys
B. Financial statements
C. Identities of certain stockholders
D. All of the above

Answer 71

D

Question 72

If permitted by law, a suspect's Social Security number can most easily be obtained through which of the following online searches?
 A. Last name search	
 B. Credit bureau header search 
 C. Motor vehicle record search	
 D. Court judgment search

Answer 72

B

Question 73

Freddie calls Alex’s bank, claiming to be Alex. Freddie tells the bank representative that he needs to make sure the bank has the correct Social Security number on his account because he had noticed an error on his statement. The bank representative refuses to give the number, and Freddie hangs up. Which of the following crimes did Freddie commit?
A. Defalcation
B. Pretexting with a financial institution
C. False statements to a phone operator
D. Fraud in the inducement

Answer 73

B
Broadly defined, pretexting is the act of impersonating someone else or making false or misleading statements to obtain, sell, or buy information about a person or organization. Under the broad definition, pretexting for nonfraudulent purposes is not always illegal, but it should be used with caution. For example, if a fraud examiner is trying to locate a witness or a suspect, he might call the person’s relative and pretend to be an old friend who is looking for a phone number. This type of pretexting might be permissible.
However, the Gramm-Leach-Bliley Act made it a criminal offense to engage in pretexting with financial institutions. In this context, pretexting is the act of obtaining customer information from financial institutions through the use of deceptive tactics.

Question 74

If the accused becomes withdrawn after his alibis have been diffused, the interviewer’s best course of action is to remain silent until the accused makes a confession. T/F

Answer 74

F

Question 75

Simone, a manager at a major company, is suspected of financial statement fraud. During an admission-seeking interview with Simone, the investigator states: “A lot of employees count on the company doing well. I know you only did this to help the company succeed. Isn’t that right?” This technique is known as:
 A. Altruism 
 B. Extrinsic rewards	
 C. Genuine need	
 D. Depersonalizing the victim

Answer 75

A

Question 76

During an admission-seeking interview, Cynthia has just accused a suspect of committing a crime. The suspect begins to deny the accusation. The best practice would be for Cynthia to interrupt the suspect’s denial at this point. t/f

Answer 76

t
Once a suspect utters a denial in an admission-seeking interview, it becomes extremely difficult for the accused to change his response, because doing so would be an admission that he lied. Therefore, the interviewer must prevent an outright denial, thereby making it easier for the subject to confess at a later time. An innocent person is unlikely to allow the interviewer to prevail in stopping the denial.
Cynthia should not allow the suspect to continue with his denial of the accusations. She can use several techniques to stop or interrupt the denial, including delays, repeated interruptions, and reasoning.

Question 77

Martin, a Certified Fraud Examiner, is conducting an admission-seeking interview of Doris, a fraud suspect. Although Martin has already interviewed several witnesses, he should not tell Doris under any circumstances that he has interviewed other individuals. T/F

Answer 77

F

Question 78

In interview situations, admission-seeking questions should be phrased “Did you do it?” rather than “Why did you do it?” T/F

Answer 78

F
People generally will not confess if they believe that there is doubt in the accuser’s mind regarding their guilt. Thus, the interviewer must convey absolute confidence in the admission-seeking interview—even if not fully convinced. The interviewer must make the accusation in the form of an implied statement of fact. Accusatory questions do not ask “Did you do it?” They ask “Why did you do it?”

Question 79

Blue, a Certified Fraud Examiner, is attempting to get a fraud suspect to admit guilt. Blue should:
A. Directly accuse the suspect
B. Give the suspect an excuse for his behavior
C. Show the suspect incriminating evidence
D. All of the above

Answer 79

D

Question 80

Which of the following is NOT part of the fraud examination process?
A. Testifying to findings
B. Writing reports
C. Determining whether the subject is guilty or innocent
D. Assisting in the detection and prevention of fraud

Answer 80

C
The term fraud examination refers to a process of resolving allegations of fraud from inception to disposition, and it is the primary function of the anti-fraud professional. The fraud examination process encompasses a variety of tasks that might include:
Obtaining evidence
Reporting
Testifying to findings
Assisting in fraud detection and prevention

Question 81

Which of the following is the most accurate statement about a fraud investigation plan?
A. An investigation plan should establish the investigation’s timeframe.
B. An investigation plan should inform employees at all levels about the investigation.
C. An investigation plan should establish which individuals violated the law.
D. An investigation plan should make a commitment to eradicate the fraudulent activity.

Answer 81

A

Question 82

Which of the following statements concerning documentation in a formal fraud examination report is most accurate?
A. The originals of important documents should be included in the report.
B. Copies of important documents should be included in the report.
C. A reference to the current location where the original documents can be found is sufficient.
D. A reference to any important documents is sufficient.

Answer 82

B

Question 83

Which of the following practices will likely enhance the chances of getting a prosecutor to pursue a criminal action against a fraud suspect?
A. Presenting a complete and organized case to the prosecutor
B. Obtaining a legal and binding admission of guilt before submitting the case
C. Following up regularly with the prosecutor
D. All of the above

Answer 83

D