CFE – Financial Transactions and Fraud Schemes — Question 49

If a construction developer submitted a draw request to a bank, which of the following would be most indicative of loan fraud?

Answer options

• A. Missing inspection reports
• B. Including lien releases from subcontractors
• C. Lack of documented expenses from other similar contracts
• D. Evidence of change orders

Correct answer: A

Explanation

The absence of inspection reports (A) is a critical indicator of potential loan fraud, as these documents are essential for verifying the progress and legitimacy of the construction work. In contrast, including lien releases (B) and evidence of change orders (D) can demonstrate proper project management, while lacking documented expenses (C) might raise questions but does not directly signify fraud.