CFCI Study Guide - Updated questions and answers
2026\2027 A+ Grade
Fraud
- correct answer "Any illegal acts characterized by deceit, concealment, or violation of trust. These acts
are not dependent upon the perpetrated by individuals and organizations to obtain money, property, or
services; to avoid payment or loss of services; or to secure personal or business ad-vantage."
Main types of fraud
- correct answer Internal Fraud and External Fraud
Internal Fraud
- correct answer Activities that may be criminal, committed within an organization, typically by the
employee against the employer.
External Fraud
- correct answer Deceptive conduct by non-employees that
deprives the organization of value, and/or is undertaken for financial gain.
Embezzlement
- correct answer The theft of money, property, or other assets of the employer.
Larceny
- correct answer The taking away of the property of another, with the intent to convert it to his/her own
use.
Financial Fraud
- correct answer "Cooking the books." This type of fraud generally refers to falsely representing the
financial condition of the company, so as to inflate the value of stock, fraudulently boost executive
bonuses, or otherwise mislead shareholders, lenders, employees, investment analysts, or other users of
the information.
,Skimming (cash larceny)
- correct answer Accounts receivable fraud, this involves simply stealing cash before it enters the
organization's accounting system.
Billing Schemes
- correct answer Using false documentation to cause a targeted organization to issue a payment for false
services and/or purchases.
Check Tampering
- correct answer Common method (Taking advantage of employee access to blank company checks,
using a password to
steal computer-generated checks or producing counterfeit checks).
Employee reimbursement scheme
- correct answer Making false claims for reimbursement or inflating or creating fictitious business
expenses. (Travel /meal reimbursement.
Corruption
- correct answer Bribery, illegal gratuities, and/or extortion.
Bribery
- correct answer When something of value is offered or given to influence a business decision.
Illegal Gratuities
- correct answer When something of value is given to an employee to reward a business decision.
Extortion
- correct answer When a person demands payment or seeks to influence a business decision by threat of
harm through loss of business or personal injury.
Kickback Schemes
- correct answer Forms of corruption involving employees and vendors, often using inflated billing or
invoices for which the employee is paid a portion of the inflated or fictitious invoice.
,Credit Card Fraud
- correct answer The creation, sale, or use of a counterfeit credit card, or the use of a stolen credit or
debit card.
C.N.P
- correct answer Card not present transactions
Identity Theft
- correct answer The fraudulent acquisition or stealing of confidential personal information through
social engineering.
Identity Fraud
- correct answer Involves the unauthorized use of another person's personal data for illegal financial
benefit. Involves abusing the stolen information to transact personal business in the victim's name.
Wildcat Banking
- correct answer An extreme form of what was called free banking. "A bank that issued notes without
adequate security in the period before the establishment of the national banking system in 1864".
2 categories that encompass Fraud
- correct answer Theft (stealing money, ID, or assets) and deception (cooking the books, lying to
shareholders, employees or partners)
Savings and Loan Crisis
- correct answer The failure of about 1000 savings and loan banks as a result of risky business practices.
The roots of the S&L crisis lay in excessive lending, speculation, and risk-taking driven by the moral
hazard created by deregulation and taxpayer bailout guarantees.
Myth #1 of the Financial Services
- correct answer "We have very little fraud here" ex: subprime mortgage fraud
Myth #2 of Financial Services
- correct answer "Ethics and training compliance has us covered" Fraud is not always covered in ethics
policy or training.
, Myth #3 of Financial Services
- correct answer "Fraud is an unavoidable cost of doing business" Fraud is usually not serious enough to
destroy a financial service firm, it is much more than necessary cost of doing business.
Chapter 1 review points
- correct answer • Statistical picture of fraud. The numbers do not lie: Fraud is a huge worldwide
problem—for all organizations.
• Financial services fraud. Seventy-four percent of financial institutions experienced attempted payment
fraud (check fraud, ACH fraud, or credit card fraud in 2020).
• Definitions of fraud. The broad definition of fraud is illegal activity representing either theft or
deception, or a combination of both.
• Myths about fraud. It is easy to become complacent about fraud but doing so can be very costly. Fraud
does occur in every organization and is potentially serious enough to cause major long-term damage.
• Main types of fraud. Countless varieties of fraud threaten financial institutions. Fraudsters are
constantly thinking up new ways to target financial services institutions.
20-60-20 rule of human component of fraud
- correct answer 20% of people will never commit fraud
60% are fence sitters and may commit fraud if given the opportunity
20% of people are inherently dishonest
2 types of insider fraud threat
- correct answer Employee level fraud and management level fraud
True or False: Managment Level Fraud is committed less frequently than employee level fraud?
- correct answer True: Management level fraud is committed less frequently than employee level fraud
however the financial loss is almost always greater.
Fraud Triangle
- correct answer Created by leading criminologist Donald Cressey. The three factors that contribute to
fraudulent activity by employees: opportunity, financial pressure, and rationalization.
Financial pressure
- correct answer Financial difficulties, such as large amounts of credit card debt, an overwhelming
2026\2027 A+ Grade
Fraud
- correct answer "Any illegal acts characterized by deceit, concealment, or violation of trust. These acts
are not dependent upon the perpetrated by individuals and organizations to obtain money, property, or
services; to avoid payment or loss of services; or to secure personal or business ad-vantage."
Main types of fraud
- correct answer Internal Fraud and External Fraud
Internal Fraud
- correct answer Activities that may be criminal, committed within an organization, typically by the
employee against the employer.
External Fraud
- correct answer Deceptive conduct by non-employees that
deprives the organization of value, and/or is undertaken for financial gain.
Embezzlement
- correct answer The theft of money, property, or other assets of the employer.
Larceny
- correct answer The taking away of the property of another, with the intent to convert it to his/her own
use.
Financial Fraud
- correct answer "Cooking the books." This type of fraud generally refers to falsely representing the
financial condition of the company, so as to inflate the value of stock, fraudulently boost executive
bonuses, or otherwise mislead shareholders, lenders, employees, investment analysts, or other users of
the information.
,Skimming (cash larceny)
- correct answer Accounts receivable fraud, this involves simply stealing cash before it enters the
organization's accounting system.
Billing Schemes
- correct answer Using false documentation to cause a targeted organization to issue a payment for false
services and/or purchases.
Check Tampering
- correct answer Common method (Taking advantage of employee access to blank company checks,
using a password to
steal computer-generated checks or producing counterfeit checks).
Employee reimbursement scheme
- correct answer Making false claims for reimbursement or inflating or creating fictitious business
expenses. (Travel /meal reimbursement.
Corruption
- correct answer Bribery, illegal gratuities, and/or extortion.
Bribery
- correct answer When something of value is offered or given to influence a business decision.
Illegal Gratuities
- correct answer When something of value is given to an employee to reward a business decision.
Extortion
- correct answer When a person demands payment or seeks to influence a business decision by threat of
harm through loss of business or personal injury.
Kickback Schemes
- correct answer Forms of corruption involving employees and vendors, often using inflated billing or
invoices for which the employee is paid a portion of the inflated or fictitious invoice.
,Credit Card Fraud
- correct answer The creation, sale, or use of a counterfeit credit card, or the use of a stolen credit or
debit card.
C.N.P
- correct answer Card not present transactions
Identity Theft
- correct answer The fraudulent acquisition or stealing of confidential personal information through
social engineering.
Identity Fraud
- correct answer Involves the unauthorized use of another person's personal data for illegal financial
benefit. Involves abusing the stolen information to transact personal business in the victim's name.
Wildcat Banking
- correct answer An extreme form of what was called free banking. "A bank that issued notes without
adequate security in the period before the establishment of the national banking system in 1864".
2 categories that encompass Fraud
- correct answer Theft (stealing money, ID, or assets) and deception (cooking the books, lying to
shareholders, employees or partners)
Savings and Loan Crisis
- correct answer The failure of about 1000 savings and loan banks as a result of risky business practices.
The roots of the S&L crisis lay in excessive lending, speculation, and risk-taking driven by the moral
hazard created by deregulation and taxpayer bailout guarantees.
Myth #1 of the Financial Services
- correct answer "We have very little fraud here" ex: subprime mortgage fraud
Myth #2 of Financial Services
- correct answer "Ethics and training compliance has us covered" Fraud is not always covered in ethics
policy or training.
, Myth #3 of Financial Services
- correct answer "Fraud is an unavoidable cost of doing business" Fraud is usually not serious enough to
destroy a financial service firm, it is much more than necessary cost of doing business.
Chapter 1 review points
- correct answer • Statistical picture of fraud. The numbers do not lie: Fraud is a huge worldwide
problem—for all organizations.
• Financial services fraud. Seventy-four percent of financial institutions experienced attempted payment
fraud (check fraud, ACH fraud, or credit card fraud in 2020).
• Definitions of fraud. The broad definition of fraud is illegal activity representing either theft or
deception, or a combination of both.
• Myths about fraud. It is easy to become complacent about fraud but doing so can be very costly. Fraud
does occur in every organization and is potentially serious enough to cause major long-term damage.
• Main types of fraud. Countless varieties of fraud threaten financial institutions. Fraudsters are
constantly thinking up new ways to target financial services institutions.
20-60-20 rule of human component of fraud
- correct answer 20% of people will never commit fraud
60% are fence sitters and may commit fraud if given the opportunity
20% of people are inherently dishonest
2 types of insider fraud threat
- correct answer Employee level fraud and management level fraud
True or False: Managment Level Fraud is committed less frequently than employee level fraud?
- correct answer True: Management level fraud is committed less frequently than employee level fraud
however the financial loss is almost always greater.
Fraud Triangle
- correct answer Created by leading criminologist Donald Cressey. The three factors that contribute to
fraudulent activity by employees: opportunity, financial pressure, and rationalization.
Financial pressure
- correct answer Financial difficulties, such as large amounts of credit card debt, an overwhelming
