ACFE Updated CFE-Financial-Transactions-and-Fraud-Schemes Exam Questions and Answers by maximillian

Detailed Explanation:

Rationale for Correct Answer: An advance-fee scheme occurs when fraudsters request upfront payments (fees, commissions, or deposits) for services or opportunities that never materialize. The broker taking the fee without providing services is a classic case.

Analysis of Incorrect Options:

A. Bait and switch – Advertising one product/service but delivering another, not applicable here.

C. Split deposit scheme – Involves diversion of payroll or deposits, not loans.

D. Scavenger scheme – Charging for unnecessary services, often debt collection or foreclosure help, not applicable.

Key Concept: Advance-fee frauds as common financial scams.

Detailed Explanation:

Rationale for Correct Answer: A kickback scheme occurs when vendors make payments to employees of a purchasing organization in exchange for steering business their way. Here, Bob steered contracts to Oak Company and received a percentage of profits, a textbook kickback arrangement.

Analysis of Incorrect Options:

B. Illegal gratuity scheme – Involves rewards after a decision, without a prior agreement. Here, the agreement was prearranged.

C. Diversion scheme – Refers to diversion of assets, not procurement favoritism.

D. Economic extortion scheme – Involves coercion of the vendor; this was voluntary bribery.

Key Concept: Bribery and kickbacks as forms of corruption.

Detailed Explanation:

Rationale for Correct Answer:This statement is True. Fraud examiners often analyze purchases by vendor to detect schemes where a single vendor receives disproportionately favorable treatment. This may indicate kickbacks, conflicts of interest, or vendor collusion schemes.

Analysis of Incorrect Options:

B. False – Incorrect, as vendor analysis is a valid tool to identify such schemes.

Key Concept:Purchases by vendor analysis as a fraud detection method.

Detailed Explanation:

Rationale for Correct Answer:Bid pooling occurs when vendors collude to divide contracts among themselves. They agree in advance who will submit the lowest bid for certain contracts, ensuring each participant gets a share of the business.

Analysis of Incorrect Options:

A. Bid opening – The formal process of opening bids, not fraud.

B. Fictitious bidding – Not a standard fraud term.

D. Bid log – A record of submitted bids, not a scheme.

Key Concept:Bid pooling — collusion among vendors in bid-rigging schemes.