FRM Part II · FRM Exam Part II · Case Study: Financial Crime and Fraud
A bank's transaction monitoring system generated 4,000 alerts in a quarter. Analysts closed 3,800 as false positives and escalated 200 for investigation, of which 50 resulted in suspicious activity reports (SARs) being filed. What are the false positive rate of alerts and the SAR conversion rate of alerts, respectively?
The false positive rate is 95% because 3,800 of 4,000 alerts were closed as non-suspicious. The SAR conversion rate relative to all alerts is 1.25% because 50 of 4,000 led to filings. The 25% figure would be conversion of escalated cases only.
- A95% and 1.25%Correct
- B95% and 25%
- C5% and 1.25%
- D5% and 25%
Explanation
False positive rate = 3,800/4,000 = 95%. SAR conversion of alerts = 50/4,000 = 1.25%. The 25% figure is 50/200, which is the conversion of escalated cases, not of all alerts. The 5% is the escalation rate, 200/4,000.
Did you get it right without looking?
One question tells you little. A timed set on Case Study: Financial Crime and Fraud shows your real accuracy, how long you take and where you lose marks.
More Case Study: Financial Crime and Fraud questions
- A trading desk's head of operations also approves the booking of trades and signs off on the reconciliation of the desk's profit and loss. O…
- After a rogue-trading incident, a bank requires all front-office traders to take at least ten consecutive business days of leave each year, …
- Which indicator would a fraud risk assessor classify as a rationalization-related warning sign rather than a pressure or opportunity sign?
- A bank's fraud-risk committee evaluates several controls for a card-not-present fraud problem. Which combination best reflects a layered, de…
- A bank's whistleblowing hotline receives few reports, and a staff survey shows employees fear retaliation. Which action is most likely to im…
- A bank's fraud analytics team reviews a transaction-monitoring model. At a given alert threshold the model generated 1,000 alerts, of which …