If you own a business, it’s essential to know how to protect it from potential threats. One of these threats is embezzlement.
What is embezzlement?
This is a common crime that mainly occurs in the employment and corporate field. Being one step ahead of the problem is key to the solution. This guide will go through embezzlement, how to identify it, and what you can do to prevent it.
Let’s get started.
What Is Embezzlement?
Embezzlement is a type of white-collar crime in which a person or entity misappropriates the assets entrusted to him or her. This is different from fraud or theft because the embezzler receives the assets lawfully, but they use them for the wrong reasons.
The main difference between embezzlement and ordinary theft is that embezzlement involves a breach of trust, a fiduciary duty. The embezzler is trusted with property, and it’s used for their own purposes, not the purposes they were entrusted with. The actual definition of embezzlement might vary among jurisdictions.
Embezzlement can be minor or incredibly large. Smaller offenses might be a store clerk that steals some money from where he works. But it can also be large, like an executive of a corporation transferring millions of falsely expensed dollars into their own personal bank accounts.
How Does Embezzlement Work?
Those entrusted with access to a business or organization’s funds need to protect those assets for their intended use. It’s against the law to willingly access those funds and utilize them for personal use. For an embezzlement charge to be supported, four factors need to be present and proven.
- There must be a relationship of trust between two parties
- The actions of the defendant were intentional
- The defendant had to have taken possession of the property or money and transferred it to someone else
- The asset must have been acquired through the relationship rather than in another manner
For clarification, the first factor means taking care of the asset and reliance by one party on the other. The last factor can be tricky to prove, like a store clerk taking money from a cash register, for example.
Types of Embezzlement
There are many examples of embezzlement. The two most common categories fall under the umbrella of employees embezzling on the job and embezzlement of property held in a trust.
When an employee takes money or property from an employer and uses it for their own benefit, that’s embezzlement. There are several ways this act can be committed:
- Taking bribes
- Tampering with employee time records
- Taking money from the cash register
- Charging more for a product then stealing the difference
- Taking office supplies for their own benefit
- Moving money from a customer’s account to a personal account
Then there’s the embezzlement of property held in trust. That can occur whenever someone mishandles the property that they’re entrusted with. This includes:
- Using a relative’s Social Security check
- Adjusting books to hide a misappropriation of funds
- Borrowing money from a civic organization’s bank account
- Taking money through a Ponzi scheme
- Selling property and stealing the profit without accounting for it
These are some of the most common types of embezzlement, but many circumstances aren’t listed here. This is meant to give you an idea of what embezzling consists of.
Consequences of Embezzlement
Of course, embezzling can be a serious crime. For that reason, let’s take a look at some of the consequences of embezzlement. Under the Texas Penal Code, embezzlement is punishable according to the money involved.
A Class C misdemeanor, in which the property was less than $50, is punishable by a fine of no more than $500. If the property’s cost was between $50 – $500, this is a Class B Demeanor and results in a fine of up to $2,000, a jail sentence of not more than 180 days, or both. Then there’s a Class A misdemeanor when the amount of property stolen is between $500 – $1,500; this is punishable by a fine of up to $4,000 and a jail sentence of up to one year.
There are felony embezzlement charges. That occurs when the stolen assets are valued at $1,500 or more. This means imprisonment starting at 180 days all the way up to life, depending on how much was robbed.
How to Protect Your Business
Now that you know about embezzlement, you can take steps to prevent it from happening. The most important thing to know is that avoiding this begins at the hiring stage. Ensure that you screen potential employees thoroughly, and do background checks, check out their social media too.
Have your employees sign a computer policy, stating that they recognize that their computer is the property of your business. Also, don’t be afraid to upgrade your security and spread out the obligations.
You’ll want to keep a tight hold on the company’s credit cards and also watch for warning signs. Listen to any employee who discusses having money problems or overspends their income. A lot of prevention is being overly cautious and keeping an eye out for suspicious activity.
You may have heard the word embezzlement while watching a courtroom drama, or maybe a friend has brought it up before, and you weren’t sure what it meant; either way, you might be asking, “what is embezzlement?” Simply put, this is a crime of stealing money that someone has entrusted you to manage or hold.
It’s imperative for business owners to know more about embezzlement, especially when 85% of cases are perpetrated by someone at the manager level or above. Doing your research is the first step to preventing any headaches from happening in the future.
Looking for more articles like this? Be sure to check out the business section of our blog!