CFE – Financial Transactions and Fraud Schemes — Question 94

Which of the following situations describes a red flag that might be indicative of loan fraud?

Answer options

• A. A change order is submitted at the same time as a draw request.
• B. A loan file contains missing documents that are later found in another file.
• C. The number of change orders for a small project continues to increase.
• D. There is low turnover in a real estate developer's personnel.

Correct answer: B

Explanation

The correct answer is B because finding missing documents in a loan file that appear in another file raises concerns about the integrity of the documentation. Options A, C, and D, while they may indicate irregularities, do not directly suggest fraudulent activity as clearly as option B does.