What Does It Mean to Embezzle From a Firm?
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Embezzlement is a method of misappropriating a company's assets by into employee or group of employees. This practice involves the procurement of the resource before it is in the possession of the embezzler. Once the employee acquires it, he will try to use it for unlawful gain. Embezzlement is classified as a violation of an employee’s fiduciary duty.
Assets which can be embezzled include money, fixed and variable assets and other valuables. For instance, a cashier can illegally obtain cash from the register, unbeknownst to his employer. Likewise, a public servant can misattribute funds from the state treasury or an accountant can misappropriate cash from their firm and conceal it in the balance sheet. In a nutshell, embezzlement is nothing less than employee theft.
How Embezzlement Works
Examples of such activities include redirecting funds to accounts that may appear authentic but in reality, these will be illegitimate transactions. The simpleccount could be a front to enable the individual to collaborate with others and misuse the money.
A person that embezzles from the firm they represent may create falsified bills and forged receipts for counterfeit transactions. Executing the transfer of funds even if the services were not rendered can be an effective method of committing this illicit activity. This crime can and does occur in some of the largest firms, but small companies are also just as vulnerable. In the health care industry, Medicare and Medicaid fraud are rampant in certain states, but also are unscrupulous employees in hospitals, administrative institutions, and physician's offices. Although law enforcement makes every effort to catch these criminals, it is still not enough to stop many of them from perpetrating these acts. Such is the case with a Long Island, NY employee of an ophthalmologist's office where she embezzled funds via altering computer records and stealing checks and crimes like this are not uncommon.
Furthermore, an embezzler may be coordinating with other parties, catching their employers unaware in the process. They may enlist the help of agents who pose as an independent contractor or a consultant of the company. Invoices and receipts may appear in the firm’s accounting records despite being fabricated.
Pragmatically, embezzlement transpires when individuals are authorized to manage their firm’s funds. The company can expect that the employee will exhibit professionalism and good conduct when given responsibility. However, if the employee intends to use the money for personal use, then that is considered embezzlement. This is illegal and a criminal offense.
There are cases where embezzlement techniques may be combined with other scams to great effect. A Ponzi scheme is one such instance. The person who embezzles may scam investors by taking their resources and use these for personal profit. Embezzlement is not just limited to money. Real estate, company property, and hardware can also be exploited in the pursuit of personal gain.
Financial embezzlement is known to happen in the government sector. Employees may seize funds allocated for local, state or national objectives and use it to their own advantage. Public figures are entrusted with taxpayer money to improve government provisions but corrupt individuals may use it for other purposes. Medicare and Medicaid fraud are typical examples of these crimes.
Methods of Embezzlement
Embezzlement can have a crippling effect on the firm affected by it. It represents one of the largest forms of fraud that a company can be exposed to. Naturally, what makes matters worse is that this crime is conducted from within by parties who are considered reliable and trustworthy. To add insult to injury, it may remain undetected for ages, which means the enterprise suffers in the long term also.
Our next goal is to examine what forms and shapes embezzlement can take.
There are businesses that operate with large amounts of cash as opposed to executing their transactions on a credit basis. When cash changes hands and a transaction is fulfilled, a dishonest employee may see it as an opportunity they can exploit.
Ventures like intimate restaurants or small-scale bars that do not accept credit cards will feature several cash transactions on an average day. Employees who view this as a weakness may manipulate the business and keep the cash. They will also skip recording the transaction, which will make it difficult to keep track. On the other hand, a transaction made through a bank card will feature on both payer and payee’s bank statements.
Lapping is defined as a scam where the payment that comes in from a client is deposited directly into the embezzler’s account. When another customer makes their payment, the embezzler records it wrongly as the primary payment received. This vicious cycle continues to misappropriate funds for personal benefits.
Embezzlers who are shrewd may disseminate a fraction of the funds received. For instance, they may steal 200 dollars from a 2000 dollar transaction. This does not arouse suspicion instantly, which allows them to remain under the radar and conduct this illegal activity. Gradually, they may increase the funds they keep as time goes on.
Although the advent of technology in the banking industry and commercial sectors had made kiting a less attractive proposition, it still occurs in some quarters. In instances of kiting, the time between the deposit of a check and the collection of funds, which is known as the float time, is when kiting takes place.
The embezzler commits the theft and deposits the amount in an account. The next step involves writing a check between two bank accounts i.e. his own and that of the business. Steadily, the embezzler augments the amount specified in the check. This is how they ensure that the money is held in two accounts simultaneously.
There are several ways that fake refunds can be employed by those who embezzle from their employers. The most conventional case involves issuing a refund to a customer that does not actually exist. The embezzler actually pockets the money in the process. Another way to use fake refunds for personal advantage is by overestimating and paying a given invoice and keeping the refunds for themselves.
Imaginary Bad Debt
A display of bad debt that is non-existent in reality is another way to scam unsuspecting employers and clients. Those responsible deposit the incoming check in to their own account and record the transaction as a bad debt in the company records. It is a simplistic technique that works wonders. While the firm’s financial records show that the money was never paid, it goes straight in to the embezzler’s personal bank account.
Posted On July 17, 2018