Skip to content

FRM Part II · FRM Exam Part II · Case Study: Financial Crime and Fraud

Following a major fraud, a bank's board asks which element most directly supports resilience by limiting the chance that one individual can both initiate and conceal fraudulent transactions. Which control best fits?

Segregation of duties combined with mandatory leave best limits the chance one person can both initiate and conceal fraudulent transactions. These controls break end-to-end control of a process and expose irregularities, whereas bonus incentives or fewer reconciliations would raise fraud risk.

  1. ASegregation of duties combined with mandatory leave for sensitive rolesCorrect
  2. BIncreasing the number of marketing campaigns to rebuild reputation
  3. CRaising employee bonuses tied to short-term trading profit
  4. DReducing the frequency of reconciliations to cut costs

Explanation

Segregation of duties and mandatory leave prevent one person from controlling and hiding a process end to end, a classic lesson from rogue trading cases. Profit-linked bonuses and fewer reconciliations increase fraud risk.

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.

Practise Case Study: Financial Crime and FraudFree diagnostic mock

More Case Study: Financial Crime and Fraud questions