Certified Fraud Examiner (CFE) Law Syllabus

What two elements must be proven for federal mail or wire fraud?

(1) A scheme to defraud (intent to deceive), and (2) use of the mails or interstate wires in furtherance of that scheme. The mailing/wire need not itself be fraudulent.

What conduct does the federal money laundering statute target, and what are its general phases?

It targets concealing the source of illegally obtained funds. Three phases: placement (introducing illicit cash into the financial system), layering (separating funds from their source through complex transactions), and integration (reintroducing the funds as apparently legitimate).

What is a RICO violation and what does it require?

The Racketeer Influenced and Corrupt Organizations Act prohibits operating an enterprise through a 'pattern of racketeering activity' — at least two predicate acts (e.g., fraud, bribery) within 10 years connected to an ongoing enterprise.

What are the two main provisions of the Foreign Corrupt Practices Act (FCPA)?

(1) Anti-bribery provisions prohibiting payments to foreign officials to obtain or retain business, and (2) accounting/books-and-records provisions requiring accurate records and internal controls.

Under the FCPA, what is the 'facilitating payments' exception?

Small payments made to expedite routine, non-discretionary governmental actions (e.g., processing permits, providing utilities) are permitted, unlike payments to influence a discretionary business decision.

What is the primary purpose of the Bank Secrecy Act (BSA)?

To require financial institutions to keep records and file reports (such as Currency Transaction Reports and Suspicious Activity Reports) that help detect and prevent money laundering.

What is a Currency Transaction Report (CTR) and when is it required?

A report financial institutions must file for cash transactions exceeding $10,000 in a single business day (including multiple related transactions that aggregate over $10,000).

What is a Suspicious Activity Report (SAR)?

A confidential report financial institutions file with FinCEN to flag transactions that may indicate money laundering, fraud, or other criminal activity; the subject may not be notified that a SAR was filed.

What is 'structuring' under anti-money-laundering law?

Deliberately breaking a large cash transaction into smaller amounts (each under $10,000) to evade the CTR reporting requirement — itself a federal crime.

Under the Sarbanes-Oxley Act, what whistleblower protection is provided to employees of public companies?

SOX prohibits retaliation against employees who report suspected fraud or securities violations, and provides remedies including reinstatement, back pay, and damages.

What incentive does the Dodd-Frank Act provide to whistleblowers?

The SEC whistleblower program awards 10%–30% of monetary sanctions over $1 million to whistleblowers who provide original information leading to a successful enforcement action.

What is a qui tam action under the False Claims Act?

A lawsuit brought by a private individual (relator) on behalf of the government against those defrauding government programs; the relator can receive a percentage (typically 15%–30%) of the recovery.

What three elements generally establish an unlawful retaliation claim by a whistleblower?

(1) The employee engaged in protected activity, (2) the employer took an adverse employment action, and (3) a causal connection between the protected activity and the adverse action.

What are the two broad categories of evidence by form?

Direct evidence, which proves a fact without inference (e.g., eyewitness testimony), and circumstantial evidence, which requires an inference to connect it to a conclusion.

What are the main types of evidence by nature?

Testimonial (witness statements), real/physical (tangible objects), documentary (writings and records), and demonstrative (charts, models, illustrations that help explain other evidence).

What two basic requirements must evidence meet to be admissible?

It must be relevant (tends to make a fact more or less probable) and not subject to exclusion (e.g., not unfairly prejudicial, hearsay without exception, or improperly obtained).

What is the difference between relevance and materiality of evidence?

Relevance means the evidence has a tendency to prove or disprove a fact; materiality means the fact it relates to is significant to the case. Evidence must be both relevant and material to be admissible.

What is the definition of hearsay?

An out-of-court statement offered in evidence to prove the truth of the matter asserted; it is generally inadmissible unless an exception applies.

Why is hearsay generally inadmissible?

Because the original declarant was not under oath and is not available for cross-examination, making the statement's reliability difficult to test.

What is the business records exception to the hearsay rule?

Records made in the regular course of business, at or near the time of the event, by someone with knowledge, are admissible despite being hearsay — important for admitting financial documents in fraud cases.

Name three common exceptions to the hearsay rule besides business records.

Present sense impression, excited utterance, statements for medical diagnosis/treatment, dying declarations, and statements against interest (any three).

What is the attorney-client privilege and who holds it?

It protects confidential communications between a client and attorney made for the purpose of obtaining legal advice; the privilege belongs to (and can only be waived by) the client.

What is the work-product doctrine?

It protects materials prepared by or for an attorney in anticipation of litigation from discovery; it protects the attorney's mental impressions and trial strategy, and is broader than attorney-client privilege.

How can a fraud examiner's work fall under attorney-client privilege or work product?

When the examiner is engaged by an attorney (e.g., through a Kovel arrangement) to assist in providing legal advice or in anticipation of litigation, their communications and reports may be protected.

Name three other recognized privileges besides attorney-client privilege.

Spousal/marital privilege, physician-patient privilege, clergy-penitent privilege, and accountant-client privilege (in some jurisdictions) — any three.

What is the chain of custody and why is it important?

It is the chronological documentation of who collected, handled, transferred, and stored evidence. It is important to prove the evidence is authentic and has not been altered or tampered with, ensuring admissibility.

What information should a chain-of-custody record contain for each transfer of evidence?

What the item is, who collected/received it, the date and time, where it was stored, and the purpose/reason for each transfer of possession.

How is documentary evidence authenticated?

By producing evidence sufficient to show the item is what it is claimed to be — e.g., witness testimony of its origin, distinctive characteristics, expert comparison, or self-authenticating qualities (such as certified public records).

What does the Fourth Amendment protect, and how does it affect fraud investigations?

It protects against unreasonable searches and seizures by the government, generally requiring a warrant based on probable cause. It restricts government investigators, but typically not private-sector fraud examiners.

What does the Fifth Amendment protect in investigations?

It protects against self-incrimination (the right to remain silent) and guarantees due process; a person cannot be compelled to be a witness against themselves in a criminal case.

What is the Sixth Amendment right relevant to fraud defendants?

The right to a speedy and public trial, to confront witnesses (Confrontation Clause), to compulsory process for obtaining witnesses, and to assistance of counsel.

Do constitutional protections like Miranda rights generally apply to private (corporate) fraud examiners?

No. Constitutional protections restrain government action; private examiners are generally not state actors, so Miranda and Fourth Amendment limits typically do not apply unless they act as agents of law enforcement.

What is the 'exclusionary rule'?

A rule that evidence obtained in violation of a defendant's constitutional rights (e.g., an illegal search) is inadmissible in a criminal trial, along with 'fruit of the poisonous tree' derived from it.

Name three civil liability risks a fraud examiner can face for improper conduct.

Defamation (false statements harming reputation), false imprisonment (unlawful detention), malicious prosecution, invasion of privacy, and infliction of emotional distress — any three.

What are the elements of defamation a fraud examiner must avoid triggering?

(1) A false statement of fact, (2) published/communicated to a third party, (3) fault (negligence or malice), and (4) harm to the subject's reputation.

What is the difference between false imprisonment and malicious prosecution?

False imprisonment is the unlawful restraint of a person's freedom of movement; malicious prosecution is wrongfully initiating legal proceedings without probable cause and with malice, which terminate in the accused's favor.

How can a fraud examiner reduce the risk of a defamation claim during an investigation?

By limiting communications about the subject to those with a need to know, sticking to documented facts rather than opinions/accusations, and maintaining confidentiality — which may invoke a qualified privilege.

What is the general rule on employee privacy expectations regarding employer-owned computers and email?

Employees generally have a reduced expectation of privacy on employer-owned systems, especially where a clear policy notifies them that systems may be monitored; such policies strengthen the employer's right to search.

What does the Electronic Communications Privacy Act (ECPA) regulate?

It restricts the interception and disclosure of electronic communications. Exceptions include consent and the business-use/provider exception, which can permit employer monitoring of company systems.

What is the difference between testifying as a lay witness and as an expert witness regarding opinions?

A lay witness may only testify to facts personally perceived and limited opinions based on those perceptions; an expert witness may offer opinions and conclusions based on specialized knowledge, even without firsthand observation.

Under the Daubert standard, what factors do courts consider when admitting expert testimony?

Whether the methodology can be (and has been) tested, peer-reviewed/published, has a known error rate, has standards controlling its operation, and is generally accepted in the relevant field.

What is the difference between the Daubert and Frye standards for expert testimony?

Frye admits expert testimony if the method is 'generally accepted' in the relevant scientific community; Daubert applies a broader, multi-factor reliability test and makes the judge a 'gatekeeper.' Federal courts and many states use Daubert.

What is the proper demeanor and approach for a fraud examiner testifying as an expert?

Remain objective, professional, and unbiased; explain findings clearly in plain language; answer only what is asked; do not advocate or become argumentative; and base opinions only on reliable evidence and sound methodology.