FDIC TE Section 9.1 - Bank and Insider Abuse UPDATED ACTUAL Questions and
CORRECT Answers
early detection of apparent fraud and insider abuse essential element in limiting the risk to the FDIC's deposit insurance funds and
uninsured depositors.
Code of Conduct should identify allowable nonbank activities and acceptable gifts or gratuities
received in the normal course of business.
- Absence may make it difficult to discipline directors, officers or employees who
may be involved in questionable activities and may cause problems for directors,
officers, employees and agents under the Bank Bribery Statute (18 U.S.C. 215).
Insider Fraud has accounted for over one-half of all bank fraud and embezzlement cases
closed by the FBI during the past several years
Insider Abuse include failure to disclose their interests that borrow from the institution or
otherwise have business dealings with the institution; diverting assets and income
for their own use; misuse of position by approving questionable transactions for
relatives, friends and/or business associates; abuse of expense accounts;
acceptance of bribes and gratuities; and other questionable dealings related to
their positions at the institution
Loan Participations can lead to substantial losses if not documented properly and if not subjected to
the same credit standards and reviews as direct loans
Real Estate Lending Problems problems revolve around inflated appraisals, land flips (interparty transactions),
fraudulent sales contracts, forged title documents, misapplication of loan
proceeds, financing of nonexistent properties, loans in the name of trustees,
holding companies and offshore companies to disguise the true identity of the
actual borrowers and fraudulent loan applications from purchasers, including
false income statements, false employment verifications, false credit reports and
false financial statements.
Secured Lending Problems Financial institutions are often lulled into a false sense of security when they
believe that they have adequate collateral for their loans; however, many
institutions fail to properly record their liens and/or fail to physically verify the
existence of their collateral.
Section 465 of the Internal Revenue Code states that an investor can only use losses available from such at risk activity to the
extent that the taxpayer is actually economically at risk in connection with the
activity.
Advance Fee Schemes involve offers of sizable funds available for loans at below market rates, with the
funds supposedly coming from some foreign interests who are seeking a safe
haven in the United States.
- The goal of the perpetrator is to collect a fee in advance since the rest of the
transaction is a sham and will never be consummated.
CORRECT Answers
early detection of apparent fraud and insider abuse essential element in limiting the risk to the FDIC's deposit insurance funds and
uninsured depositors.
Code of Conduct should identify allowable nonbank activities and acceptable gifts or gratuities
received in the normal course of business.
- Absence may make it difficult to discipline directors, officers or employees who
may be involved in questionable activities and may cause problems for directors,
officers, employees and agents under the Bank Bribery Statute (18 U.S.C. 215).
Insider Fraud has accounted for over one-half of all bank fraud and embezzlement cases
closed by the FBI during the past several years
Insider Abuse include failure to disclose their interests that borrow from the institution or
otherwise have business dealings with the institution; diverting assets and income
for their own use; misuse of position by approving questionable transactions for
relatives, friends and/or business associates; abuse of expense accounts;
acceptance of bribes and gratuities; and other questionable dealings related to
their positions at the institution
Loan Participations can lead to substantial losses if not documented properly and if not subjected to
the same credit standards and reviews as direct loans
Real Estate Lending Problems problems revolve around inflated appraisals, land flips (interparty transactions),
fraudulent sales contracts, forged title documents, misapplication of loan
proceeds, financing of nonexistent properties, loans in the name of trustees,
holding companies and offshore companies to disguise the true identity of the
actual borrowers and fraudulent loan applications from purchasers, including
false income statements, false employment verifications, false credit reports and
false financial statements.
Secured Lending Problems Financial institutions are often lulled into a false sense of security when they
believe that they have adequate collateral for their loans; however, many
institutions fail to properly record their liens and/or fail to physically verify the
existence of their collateral.
Section 465 of the Internal Revenue Code states that an investor can only use losses available from such at risk activity to the
extent that the taxpayer is actually economically at risk in connection with the
activity.
Advance Fee Schemes involve offers of sizable funds available for loans at below market rates, with the
funds supposedly coming from some foreign interests who are seeking a safe
haven in the United States.
- The goal of the perpetrator is to collect a fee in advance since the rest of the
transaction is a sham and will never be consummated.
