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

Which indicator would a fraud risk assessor classify as a rationalization-related warning sign rather than a pressure or opportunity sign?

An employee repeatedly claiming the firm underpays staff and therefore owes them is a rationalization sign, because it is a self-justification for wrongdoing. Gambling debts signal pressure, while unrestricted approval access and sole custody of cheque stock signal opportunity.

  1. AAn employee repeatedly states that the firm underpays staff and therefore 'owes' themCorrect
  2. BAn employee with large gambling debts asks for salary advances
  3. CAn employee has unrestricted system access to approve and book payments
  4. DAn employee is the sole custodian of blank cheque stock

Explanation

Statements that the employer owes the person are self-justifications, i.e. rationalization. Gambling debts indicate pressure, while unrestricted access and sole custody indicate opportunity.

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