CFE – Financial Transactions and Fraud Schemes — Question 88

Several parties in the real estate business collude to obtain a construction loan to build a residential development on a property that does not actually exist. The co-conspirators split the proceeds, leaving the lender with no collateral to foreclose on. Which of the following BEST describes this scheme?

Answer options

• A. Property flopping
• B. Daisy chain
• C. Phantom lien
• D. Air loan

Correct answer: C

Explanation

The correct answer is 'Phantom lien' because it refers to a claim against a property that does not exist, which aligns with the described scheme. 'Air loan' could also be a consideration, but it typically refers to loans secured by properties that are not real or exist only on paper. The other options do not accurately describe the fraudulent nature of this situation.