CFE-Law Free Practice Test

Davis is an employee at Waccamaw Homeplace a publicly traded corporation Davis knows that Waccamaw is about to publicly announce a new joint venture project in China, so he buys shares of Waccamaw stock Assuming that his conduct was illegal m the jurisdiction in which he works and resides, what type of crime did Davis MOST LIKELY commit?

1. A. Churning
2. B. Futures fraud
3. C. Insider trading
4. D. Trading on margin

Correct Answer: C

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?

1. A. Overstate revenues
2. B. Structured deposits
3. C. Trade-based laundering
4. D. None of re above

Correct Answer: A

Ellis works for a business that filed for bankruptcy. The administrator presiding over the bankruptcy contacts Ellis and requests information regarding his employer's financial affairs Assuming the administrator has all of the powers recommended in the World Bank Principles for Effective Insolvency and Creditor/Debtor Regimes (World Bank Principles) which of the following is TRUE?

1. A. The administrator may only seek information regarding the bus ness that filed bankruptcy if Ellis consents to providing it.
2. B. The administrator has no power to obtain the information under any circumstances
3. C. The administrator may compel Ellis to provide the information despite Ellis's relationship to the business
4. D. The administrator may not obtain the information unless the business agrees in writing

Correct Answer: C

Which of the following is NOT a legal element that must be shown to prove a claim for fraudulent misrepresentation of material facts?

1. A. The victim relied on the misrepresentation
2. B. The defendant acted negligently
3. C. The defendant made a false statement (i, e., a misrepresentation of fact)
4. D. The victim suffered damages as a result of the misrepresentation

Correct Answer: B

Which of the following statements concerning front businesses as a method of laundering money is the LEAST ACCURATE?

1. A. A red flag of a front business is the observation of a large number of customers during peak operating hours
2. B. Front businesses provide cover for delivery and transportation related to illegal activity
3. C. From criminals' perspective a disadvantage to front businesses is that they generally must pay taxes on the illicit income
4. D. Front businesses benefit launderers by providing a safe place to manage criminal activities

Correct Answer: A