FRM Part II · FRM Exam Part II · Case Study: Financial Crime and Fraud
A branch manager has not taken consecutive leave in six years, and exception reports from her branch are always reconciled by her personally. Which control would most effectively help detect any ongoing concealed fraud?
Mandatory block leave, with someone else covering her duties, is the most effective detective control. Many frauds need the perpetrator's continuous presence to stay hidden, so an enforced absence and replacement often reveals irregularities that personal reconciliation had concealed.
- AMandatory block leave with another employee covering her dutiesCorrect
- BRaising her performance bonus to reduce incentive to commit fraud
- CAdding a second copy of the branch's paper records
- DPublishing the anti-fraud policy on the intranet
Explanation
Mandatory leave forces someone else to perform the role, which often exposes schemes that need continuous manipulation by the perpetrator. A bonus does not detect fraud and may add pressure. Policy publication and record copies do not address the concealment through personal reconciliation.
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 bank's compliance officer is reviewing its customer due diligence program. A new corporate client is a holding company whose shares are ow…
- A bank has 40 critical business services. After a payments fraud incident forced a systems shutdown, management sets an impact tolerance for…
- A compliance officer notices a customer making many cash deposits of just under the reporting threshold across several branches in one week,…
- 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, …
- A bank discovers that a payment it processed involved an entity owned 60% by a person newly added to a sanctions list. Under common sanction…