Joey, a citizen serving as treasurer for his church, forms a business called Trash Collectors, Inc., which invoices the church $500 monthly for services he does not perform. He is the sole signatory on the church's checking account. Which statement best reflects Joey's situation?

• A. He has probably engaged in both fraud and money laundering
• B. He acted legally as a church treasurer
• C. He has committed only a bookkeeping error
• D. He has engaged in tax evasion only

Answer: (A)

This item tests how misuse of fiduciary authority can involve both fraud and money laundering. Joey is treasurer and sole signatory, and he forms a private company that invoices the church for services he does not perform. That setup shows intentional deception to obtain church funds (fraud) and, because those funds are diverted through a business he controls as a means to disguise their true origin and ownership, it resembles money laundering—making illicit funds appear legitimate by routing them through a separate entity. It isn’t a legal, legitimate activity, nor simply a bookkeeping error, and it isn’t only tax evasion, since the core issue is misappropriating church funds and concealing their source.