The largest embezzlement scheme ever was only uncovered a few years ago. Bernie Madoff, a hedge fund manager and professional fraudster, cheated thousands of clients out of more than sixty billion dollars.
But what is embezzlement? It is a kind of white-collar crime in which someone misappropriates the assets entrusted to them.
With this kind of fraud, the embezzler legally attains the assets and they are allowed to hold onto them. However, the assets are used for unintended purposes.
Would you like to learn more? If you would, then keep on reading and we’ll walk you through everything that you will want to know about embezzlement.
What Is Embezzlement
People who are given access to a company’s funds are expected to use those funds only for their intended purposes. It is against the law to access this kind of money and use it for personal reasons.
Activities like this can include diverting money to accounts that seem like they are authorized to get transfers or payments.
In actuality, the account is just a front. It lets the criminal take the funding without permission.
For example, an embezzler might create receipts and bills for business activities that never actually happened. They might also do this for services that were never really rendered. These actions are used to make it seem like the transfer of funds is being used for legitimate purposes.
Someone who embezzles may collaborate with a partner. That partner might have the title of contractor or consultant. This person will issue invoices and they will be given payments.
However, that person never actually performs the roles that they are being paid to do.
Size Doesn’t Matter
When it comes to embezzlement, the schemes can be both large and small. Embezzling funds can be as small as a store clerk taking some money from the cash register.
Of course, embezzlement can be a lot larger than that too. Embezzlement can also take place when the executive of a major corporation falsely spends millions of dollars and then transfers the money into their personal bank accounts.
Depending on the size of the crime, embezzlement can be punishable by time in prison and large fines.
How Embezzlement Works
Embezzlement takes place when a person misappropriates or steals what they were given to keep safe or manage. The asset or property doesn’t need to be worth a lot in order for embezzlement to take place.
While it’s closely related, it is different from fraud. This is because the embezzler was allowed to oversee or use the funds.
With that said, some kinds of embezzlement can be combined with other types of fraud, like a Ponzi scheme. In these instances, the embezzler scams investors to entrust them with their money to invest on their behalf. However, they instead use the using money for personal enrichment and gain.
Maintaining this kind of fraud usually means that they need to find new investors who can bring in more money so that they can keep the older investors content.
More Than Just Money
Someone who embezzles might also assets that are not money. For example, the criminal may claim the company smartphones, vehicles, real estate, and other items that belong to a company for personal use.
Embezzlement can also happen in government organizations. For example, workers might seize national, state, or local funding for themselves.
Instances might take place when funding is disbursed to support projects or fulfill contracts. A member of the staff might then take some money that was earmarked.
When people embezzle money, they might be charged with a criminal offense. They can also be held civilly responsible for their crimes.
The punishment for these crimes can range include paying restitution to victims and monetary damages. It can also time in prison.
A person who commits this kind of crime can also end up spending a long time in prison. For example, Bernie Madoff was sentenced to more than 100 years in prison.
How to Prevent Embezzlement
Embezzlement and theft cost companies billions of dollars every year. In fact, a lot of businesses fail because of these issues. This is why it is so important that companies come up with strategies to fight these kinds of crimes.
Embezzlement starts when a person who has the authority to care of someone else’s money breaches that person’s trust. This means that you need to carefully vet employees in these kinds of positions.
They should have a clean background and good character traits.
You should also hire a third party to help with risk management. These people will implement internal controls to monitor behavior.
The sooner you can detect embezzlement, the more money you can save. You need to make it clear to your employees that this kind of crime will not be tolerated at all.
If you have been accused of embezzlement then you need to speak to an embezzlement lawyer.
The Importance of Knowing About Embezzlement
Hopefully, after reading the above article, you now have a better idea of what is embezzlement. As we can see, embezzlement is a serious crime that can lead to people and companies losing a lot of money. This is why it is so important that you are honest in your business dealings and keep an eye out for white-collar criminals.
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