Financial Instituion Fraud Flashcards
A double-pledging collateral scheme is a type of loan fraud in which a borrower uses the same property as collateral with different lenders before liens are recorded without telling the lenders.
A. True
B. False
True
Karl finds a residential property with a nonresident owner. He then forges contractual property documents showing that the owner is transferring ownership of the property completely to Karl, such as would normally happen during a property sale. The property owner is unaware that Karl has created and filed the documents. Later, Karl takes the falsified documents to a lender and borrows money against the property. Which of the following MOST ACCURATELY describes Karl’s scheme?
A. Air loan
B. Property flipping
C. Unauthorized draw on home equity line of credit
D. Fraudulent sale
D. Fraudulent sale
Because it is a common occurrence, the fact that documents are missing from a loan file is generally NOT a red flag for loan fraud.
A. True
B. False
False
When a construction developer submits a draw request to a lender, all the following would be red flags for loan fraud EXCEPT:
A. Omission of developer’s personal account statements
B. Invoice documentation that appears altered
C. Missing inspection reports
D. Failure to include lien releases from each subcontractor
A. Omission of developer’s personal account statements
Which of the following is a red flag for new bank account fraud?
A. A customer leaves out requested information on the account application
B. A customer requests a large cash withdrawal immediately after opening the account
C. A customer lists a mail drop as the account’s mailing address
D. All of the above
D. All of the above
Which of the following situations would be MOST INDICATIVE of a customer committing new account fraud at a bank?
A. An invalid address or phone number is listed in the customer’s account information.
B. A customer opens a new personal account and immediately requests two ATM cards.
C. A customer deposits a substantial amount of funds in a new personal account and does not spend or withdraw them for several months.
D. A customer opens a business account and soon after has payroll transactions on the account.
A. An invalid address or phone number is listed in the customer’s account information.
Which of the following statements regarding new account fraud schemes is LEAST ACCURATE?
A. New account fraud sometimes involves withdrawing funds after opening a new business account using checks stolen from another business.
B. Mobile deposits are at high risk for new account fraud because face-to-face, in-person transactions are not required.
C. New account criminals often use false identification to open new bank accounts and steal money before funds are collected by the financial institution.
D. Automated teller machines (ATMs) are rarely targets of new account fraud because most have cameras installed
D. Automated teller machines (ATMs) are rarely targets of new account fraud because most have cameras installed.
Which of the following statements regarding new account fraud is LEAST ACCURATE?
A. Automated teller machines (ATMs) are often enticing targets for new account fraud because they do not require in-person transactions with bank tellers.
B. New account fraud can be defined as any fraud that occurs on an account within the first ninety days that it is open.
C. Fraud is more likely to occur in accounts that have been newly opened than in established accounts.
D. Mobile deposits are at low risk for new account fraud because they involve sending digital images of payment orders to financial institutions rather than providing physical copies.
D. Mobile deposits are at low risk for new account fraud because they involve sending digital images of payment orders to financial institutions rather than providing physical copies.
Which of the following is a potential indicator of a loan fraud scheme?
A. There is an increasing trend in the number of change orders for a small project.
B. No change orders have been received for a large project.
C. Only two change orders have been requested for a long, complex project.
D. All of the above are potential indicators of a loan fraud scheme.
D. All of the above are potential indicators of a loan fraud scheme.
ABC Bank recently acquired a new portfolio of consumer loans. Because this loan portfolio is experiencing a default rate that is higher than normal, management has asked Bradley, a Certified Fraud Examiner (CFE), to evaluate the portfolio. Bradley notices that the loan package was sold without recourse to the broker, the brokerage fee was high relative to other purchases, and the broker is no longer in business. Which of the following types of schemes has Bradley MOST LIKELY uncovered?
A. Daisy chain fraud
B. Brokered loan fraud
C. Money transfer fraud
D. Letter of credit fraud
B. Brokered loan fraud
A draw request on a construction loan should be accompanied by all the following EXCEPT:
A. Lien releases from subcontractors
B. Expenses from similar contracts
C. Change orders, if applicable
D. Inspection reports
B. Expenses from similar contracts
Which of the following BEST describes the difference between a flipping scheme and a flopping scheme in the context of mortgage fraud?
A. In a flopping scheme, the lender is not one of the potential victims of the scheme.
B. In a flopping scheme, the second transaction in the scheme usually occurs several years after the first.
C. In a flopping scheme, the value of the first transaction is deflated instead of inflating the second transaction.
D. In a flopping scheme, the original seller always ends up as the final owner of the property.
C. In a flopping scheme, the value of the first transaction is deflated instead of inflating the second transaction.
A higher-than-normal level of employee turnover associated with a real estate developer is often a red flag of loan fraud.
A. True
B. False
True
The purpose of draw requests in construction lending is to provide:
A. Documentation that all architectural and engineering designs and quotes have been completed
B. Documentation that costs have been incurred and reimbursement is sought
C. Documentation that the design is approved by the International Union of Architects
D. Documentation that the construction project cannot continue without additional funding
B. Documentation that costs have been incurred and reimbursement is sought
Which of the following BEST describes a linked financing loan fraud scheme?
A. Borrowers pledge the same collateral with different lenders before liens are recorded without telling the lenders.
B. Unqualified borrowers misrepresent personal creditworthiness, overstate their ability to pay, and misrepresent characteristics of a housing unit.
C. Large deposits (usually brokered deposits) are offered to a bank on the condition that loans are made to individuals affiliated with the deposit broker.
D. Insiders in different banks cause their banks to lend funds or sell loans to other banks with agreements to buy their loans.
C. Large deposits (usually brokered deposits) are offered to a bank on the condition that loans are made to individuals affiliated with the deposit broker.
