Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

A 'Ponzi' scheme is named after which individual?

1. Charles Dickens

2. Charles Ponzi

3. Charles Schwab

4. Charles Darwin

The correct answer is: Charles Ponzi

A 'Ponzi' scheme is named after Charles Ponzi, an Italian swindler who became notorious in the early 20th century for his fraudulent investment scheme. Ponzi promised high returns to his investors, claiming that profits would come from international postal reply coupons; however, he was essentially paying returns to earlier investors with the capital of newer investors. This scheme is considered a form of investment fraud where returns are paid to existing investors from funds contributed by new investors, instead of from profit earned by the operation of a legitimate business. The identification of Charles Ponzi as the namesake for this type of scheme is critical in understanding the mechanics of how such fraud operates and the historical context surrounding its inception. His actions serve as a cautionary tale regarding the importance of regulatory oversight and the potential for financial schemes to exploit the trust of individuals seeking to invest their money. The other individuals mentioned in the choices are unrelated to the concept of investment fraud: Charles Dickens was a famous author; Charles Schwab is known for his role in the financial services industry; and Charles Darwin is famous for his contributions to the theory of evolution. Thus, knowledge of these historical figures does not connect to the principles behind a Ponzi scheme, focusing instead on Charles Ponzi