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CFE-Law Certified Fraud Examiner (CFE) - Law Questions and Answers

Questions 4

The________________requires that an employee act solely in the best interest of their employer, free of any serf-dealing, conflicts of interest, or other abuse that results in a personal advantage

Options:

A.

Duty of care

B.

Duty of responsibility

C.

Duty of employee trust

D.

Duty of loyalty

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Questions 5

Which of the following is NOT an element that must be proven to establish a penury offense?

Options:

A.

The defendant made a false statement that was material

B.

The defendant made a false statement white under oath.

C.

The defendant made the statement with knowledge of its falsity

D.

The defendant made a false statement in a court of law.

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Questions 6

Raj is an employee who works in a jurisdiction that prohibits unreasonable workplace searches and surveillance in areas or items where employees have a reasonable expectation of privacy. In which of the following is Raj MOST LIKELY to have a reasonable expectation of privacy?

Options:

A.

A backpack brought from home

B.

A filing cabinet in the office lobby

C.

A waste bin m the employee's office

D.

A company-issued tablet computer

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Questions 7

Which of the following is NOT an element that is generally required to establish a claim alleging the common law civil wrong for intentional infliction of emotional distress?

Options:

A.

The defendant acted intentionally or recklessly.

B.

The victim's distress occurred for at least two years.

C.

The defendant engaged in extreme and outrageous conduct.

D.

The victim suffered distress due to the defendant's conduct.

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Questions 8

Under the World Bank Principles for Effective Insolvency and Credit/Debtor Regimes (World Bank Principles), which of the following parties should administer the debtor's estate in liquidation bankruptcy proceedings?

Options:

A.

The jurisdiction's commerce department or equivalent agency

B.

The creditor with the largest claim against the debtor

C.

The debtor, supervised by an independent insolvency representative

D.

An independent insolvency representative

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Questions 9

Which of the following is a legal element that must be shown to prove a claim for commercial bribery?

Options:

A.

The defendant acted negligently.

B.

The defendant gave or received a thing of value.

C.

The principal suffered damages as a result of the bribe

D.

The defendant failed to exercise due care.

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Questions 10

Which of the following examples of judicial systems would BEST be described as a civil law system?

Options:

A.

The courts are allowed to consider both codified statutes and previous court decisions but are bound by neither

B.

The courts are bound by both previous court decisions and codified principles or statutes

C.

The courts are bound primarily by previous court decisions to reserve legal issues

D.

The courts are bound by codified principles or statures but are not bound by previous court decisions

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Questions 11

Kamala is conducting a fraud examination in a country where courts apply laws from codified statutes to each case. When deciding legal issues, the courts are not bound by similar court decisions from previous cases. The country where Kamala is working MOST LIKELY has a __________ judicial system.

Options:

A.

Common law

B.

Civil law

C.

Substantive law

D.

Statutory law

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Questions 12

Which of the following scenarios MOST ACCURATELY represents a suitability violation in a jurisdiction that imposes a suitability requirement on broker-dealers?

Options:

A.

A broker-dealer is unfamiliar with their client's risk appetite, so they refuse to make any investments on the client's behalf without additional information.

B.

A broker-dealer learns about a promising investment and recommends it to their new client without knowing the client's relevant personal and financial information.

C.

A broker-dealer makes an extremely conservative recommendation to a client that aligns with their risk profile and financial information.

D.

A broker-dealer makes an investment for a client without first obtaining the client's approval to make that specific transaction on their behalf.

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Questions 13

Which of the following is a requirement of the European Union's (EU) General Data Protection Regulation (GDPR)?

Options:

A.

An organization must obtain a data subject's consent before collecting or processing personal data about that individual.

B.

An organization must refrain from confirming or denying whether it is in possession of a data subject's personal data even if the data subject requests this information.

C.

An organization must provide a data subject's personal data upon that individual's request for a reasonable fee.

D.

An organization must notify all affected data subjects within six months when a data breach occurs that is likely to result in a high risk to their rights and freedoms.

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Questions 14

Which of the following statements regarding the qualifications of expert witnesses in most inquisitorial jurisdictions is CORRECT?

Options:

A.

Certification in a specific field is always enough to qualify an expert

B.

An excerpt is not qualified to testify unless all parties to the litigation approve

C.

Experts are generally prohibited from serving as expert witnesses in multiple cases

D.

The qualification of an expert is generally based on standardized requirements

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Questions 15

Which of the following statements is TRUE regarding criminal proceedings and discovery in adversarial jurisdictions?

Options:

A.

Most criminal proceedings are divided into pretrial, investigative and trial phases

B.

Parties typically cannot request evidence from each other until after the trial begins.

C.

The majority of criminal discovery usually occurs before the trial begins.

D.

The judge is the primary driver of the discovery process in criminal proceedings.

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Questions 16

Company A sued Company B to recover damages tor the breach of a contract. In the same proceeding Company B sought damages for an allegation that Company A fraudulently induced Company B into entering the contract In this case what would Company B's claim against Company A be called?

Options:

A.

Cross-claim

B.

Collateral attack

C.

Reversal

D.

Counterclaim

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Questions 17

The Financial Action Task Force (FATF) Recommendations suggest that countries should do which of the following?

Options:

A.

Use a risk-based approach when creating and establishing their anti-money laundering policies.

B.

Require financial institutions to monitor their customers' social media activity for signs of money laundering.

C.

Only conduct business with other countries that comply with the anti-money laundering recommendations.

D.

Impose a sentence of five years of imprisonment for all money laundering and terrorist financing convictions.

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Questions 18

A prosecutor died criminal charges against Rosa calming that she stole Juan's personal information and sold his identity on the dark web Juan wants to file a civil lawsuit against Rosa to recover damages arising from the identity theft Can Juan file the civil action before the criminal action against Rosa is completed?

Options:

A.

Yes, the evil action can be filed if the jurisdiction permits parallel proceedings.

B.

No, the civil action cannot be filed if the jurisdiction prohibits counterclaims.

C.

Yes, the evil action can be filed if the jurisdiction permits analogous cairns.

D.

No, the civil action cannot be filed if the jurisdiction prohibits double jeopardy.

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Questions 19

Which of the following statements concerning fact finders in criminal trials in common law jurisdictions is MOST ACCURATE?

Options:

A.

The presence of a jury is always required to make factual findings in a common law criminal trial

B.

A panel of a professional judge and lay judges usually serves as the fact finder in serious cases

C.

A judge is typically responsible for factual findings

D.

Juries usually serve as the fact finder in serious cases

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Questions 20

One of the purposes of securities regulation is to promote an active and competitive market.

Options:

A.

True

B.

False

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Questions 21

According to the best practices regarding large cash transactions with customers as provided by the Financial Action Task Force (FATF) Recommendations, which of the following transactions would require a report to be filed with the government?

Options:

A.

A domestic cash deposit into a bank of a sum that is below the jurisdiction's designated threshold.

B.

A single cash purchase of restaurant supplies for a sum that is above the jurisdiction's designated threshold.

C.

A single cash purchase of casino credits for a sum that is above the jurisdiction's designated threshold.

D.

All of the above.

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Questions 22

Calvin, an attorney, sends a letter that is protected by a legal professional privilege to Katrina, one of his clients. Upon receiving the letter, Katrina emails it to her coworker who has no need to know the information contained in the letter. Which of the following statements is MOST ACCURATE?

Options:

A.

The privilege might have been waived because Katrina used email to transmit the protected information.

B.

The privilege might have been waived because Katrina transmitted the protected information to a third party who has no need to know the information.

C.

The privilege was not waived by Katrina because the legal professional privilege belongs to the attorney, not the client.

D.

The privilege was not waived because the legal professional privilege cannot be waived by transmitting protected information to a third party.

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Questions 23

Which of the following is the MOST ACCURATE statement about the different types of alternative dispute resolution'?

Options:

A.

The agreements reached in mediations are generally nonbinding.

B.

In a mediation session, the mediator decides who should win the dispute at issue

C.

The decisions reached in all arbitrations are always binding

D.

In an arbitration proceeding the arbitrator acts as a judge or jury by deciding the dispute at issue on its merits

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Questions 24

Ramona is investigating Eugene for misconduct Ramona and Eugene both work for Elek-Tek, which operates in a jurisdiction with evil laws for defamation, invasion of privacy and conflict of interest During the investigation Ramona obtained ^formation that Eugene is cheating on his spouse Ramona to a large group of Elek-Tek employees that Eugene was committing adultery, which turned out to be true Which cause of action would give Eugene the BEST chance for success m a civil suit against Ramona?

Options:

A.

Conflict of interest

B.

Defamation

C.

Public disclosure of private facts

D.

Slander

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Questions 25

Which of the following statements about civil actions in most jurisdictions is CORRECT?

Options:

A.

The plaintiff's complaint must typically contain a copy of all documents that might be relevant to the case.

B.

Civil actions begin with the filing of a pleading, usually in the jurisdiction where the defendant resides or where the claim originated.

C.

The plaintiff's complaint does not need to state the grounds for legal relief.

D.

All of the above are correct.

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Questions 26

Frederick has multiple high-volume foreign bank accounts. The country he lives in requires him to report such accounts annually for tax purposes but he regularly and intentionally fails to report his accounts in order to reduce the amount of taxes he must pay. Which of the following schemes has Frederick MOST LIKELY committed?

Options:

A.

A tax credit evasion scheme

B.

A value-added tax evasion scheme

C.

An excise tax evasion scheme

D.

An income and wealth tax evasion scheme

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Questions 27

Which of the following schemes involves disguising money from illegal nonbusiness sources by recording more income on a business's books than the business actually generates?

Options:

A.

Overstate revenues

B.

Structured deposits

C.

Trade-based laundering

D.

None of re above

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Questions 28

In common law jurisdictions failing to suspend routine destruction of electronic data can result in sanctions for failure to preserve relevant evidence

Options:

A.

True

B.

False

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Questions 29

In most common law jurisdictions, which of the following BEST describes when the duty to preserve evidence begins?

Options:

A.

When litigation is reasonably anticipated

B.

When the company receives notice of the lawsuit

C.

When the judge sets the schedule for discovery

D.

When the court orders the party to produce the evidence

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Questions 30

The concealment of assets occurs most commonly in which of the following types of fraud schemes?

Options:

A.

Bankruptcy fraud

B.

Fictitious revenues

C.

Payroll fraud

D.

Income smoothing

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Questions 31

Which of the following is a legal element that the government must show to prove a cnminal conspiracy?

Options:

A.

One of the conspirators knowingly committed an oven act in furtherance of the conspiracy

B.

The conspirators accomplished the purpose of the conspiracy that was initially established

C.

The defendant knew all the details or objectives of the conspiracy

D.

The defendant knew the identity of all the participants in the conspiracy

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Questions 32

Which of the following is a method of disguising money acquired from illegal sources by recording more income on a business's books than the business actually generates?

Options:

A.

Overstating revenues

B.

Reporting real estate purchases

C.

Recording but not depositing revenue

D.

None of the above

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Questions 33

Which of the following is an example of a trade-based money laundering scheme?

Options:

A.

An importer and an exporter conspire to conceal illicit funds by creating invoices that understate the quantity of goods shipped internationally

B.

An accountant overstates a restaurants revenues to hide illegal funds that are secretly laundered through the business

C.

A drug cartel outside of the United States launders illicit funds by hiring runners to deposit small amounts of money in bank accounts throughout the United States

D.

A businessperson deposits illicit funds into the bank account of a company they secretly own which then lends the funds back to them

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Questions 34

A business files for bankruptcy with the goal of obtaining relief from creditors so that it can rearrange its financial affairs and continue as a going concern. Which of the following describes this type of bankruptcy proceeding?

Options:

A.

Reorganization bankruptcy

B.

Debt adjustment bankruptcy

C.

Debt dismissal bankruptcy

D.

Liquidation bankruptcy

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Questions 35

Greta is convicted of white-collar crime. However, her sentence is suspended in return for her promise of good behavior. Which of the following BEST describes Greta's sentence?

Options:

A.

Determinate sentence

B.

Probation

C.

indeterminate sentence

D.

Deferred prosecution agreement

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Questions 36

Which of the following statements about the International Organization of Securities Commissions (IOSCO) s TRUE?

Options:

A.

IOSCO is a self-regulatory organization for companies that have securities traded on international securities markets

B.

IOSCO provides a forum for regular cooperation on banking supervisory matters affecting developing nations

C.

IOSCO is an oversight body responsible for issuing and enforcing regulations that govern all international securities markets

D.

IOSCO is recognized as the international standard-setter for securities markets

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Questions 37

Which of the following is MOST LIKELY to affect the rights that an employee may have during an internal investigation?

Options:

A.

The likelihood that the case will eventually go to trial.

B.

The existence of a collective bargaining agreement.

C.

The amount of evidence that the employer possesses.

D.

The length of the employee's tenure at the organization.

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Questions 38

During a trial in an adversarial system an attorney calls an expert witness to the stand and asks "Could you please describe the procedures you performed in your examination?'' Based on this question, which type of testimony is MOST LIKELY being presented'?

Options:

A.

Impeachment

B.

Direct exam Ml mi

C.

Cross-examination

D.

Request for admission

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Questions 39

The same customer comes into a casino each day and deposits a large amount of cash into an account but after very little gambling the customer withdraws the funds The casino employees suspect that the customer may be engaged in money laundering activity Assuming that the anti-money laundering (AML) regulations that govern the casino’s activities correspond to the Financial Action Task Force (FATF) Recommendations the casino:

Options:

A.

May, but is not required to file a report of suspicious transactions related to possible money laundering with appropriate authorities

B.

May not file a report of suspicious transactions related to potential criminal activity with appropriate authorities

C.

Is required to file a report of suspicious transactions with appropriate authorities because the employees suspect money laundering violations

D.

Is required to file a cash transaction report for possible criminal activity with appropriate authorities because cash was involved

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Questions 40

The Organisation for Economic Co-operation and Developments (OECD) Recommendation on Combating Bribery m International Business (Recommendation) urges member states to combat the bribery of foreign public officials by taking steps to improve which of the following primary areas within their respective infrastructures?

Options:

A.

Public health and safety regulations

B.

Laws and regulations related to public subsidies licenses, and contract procurement

C.

Laws and regulations covering e-commerce

D.

Consumer data protection laws

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Questions 41

Which of the following, if available, would help an organization recover losses from an instance of internal fraud?

Options:

A.

Privilege insurance

B.

Customer liability policy

C.

Fidelity insurance

D.

Deposition

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Questions 42

Each of the following is a common legal defense for tax evasion EXCEPT:

Options:

A.

The taxpayer relied on an attorney or accountant.

B.

The taxpayer has filed for bankruptcy.

C.

The taxpayer has a mental illness.

D.

There is no tax deficiency.

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Questions 43

In most civil law jurisdictions which of the following BEST describes when a party is required to begin taking steps to preserve and produce relevant evidence?

Options:

A.

When the court orders such steps to be taken

B.

When litigation has started

C.

When the party receives a service of process

D.

When the charging documents are filed

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Questions 44

Which of the following is a right of individuals accused of crimes under the United Nations' (UN) International Covenant on Civil and Political Rights (ICCPR)?

Options:

A.

Right of the accused to be released from custody pending trial

B.

Right of the accused to a trial without public disclosure of the results

C.

Right of the accused to unlimited appeals in criminal trials

D.

Right of the accused to be informed of criminal charges

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Questions 45

Alicia has been charged with tax evasion. As a defense, Alicia claims that she made an honest mistake due to the complexity of the tax law and did not intentionally violate the jurisdiction's tax laws. If the court finds that her mistake was made in good faith, then she will most likely NOT be found to have willfully engaged in fraudulent actions to avoid reporting or paying her taxes.

Options:

A.

True

B.

False

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Questions 46

Each day, Rachel purchases $14 500 in bearer instruments with cash from a bank where all currency transactions above 515,000 must be reported to the government Rachets actions are a red flag of which of the following schemes'?

Options:

A.

Channel stuffing

B.

Alternative remittance system

C.

Structuring

D.

Real estate laundering

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Questions 47

XYZ Company sued Faith to recover damages based on a claim of misappropriation of funds. In the same civil proceeding, Faith sued XYZ for false imprisonment that allegedly occurred during an interview. In this situation, the claim by Faith against XYZ Company can BEST be described as a:

Options:

A.

Reverse action

B.

Parallel proceeding

C.

Counterclaim

D.

Cross-claim

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Exam Code: CFE-Law
Exam Name: Certified Fraud Examiner (CFE) - Law
Last Update: Apr 19, 2025
Questions: 158
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