• 11th July 2024

Understanding and Preventing Embezzlement: Your Legal Guide

Different embezzlement forms

Embezzlement is a type of financial fraud that mainly involves larceny. Embezzlement is when someone misappropriates the assets you entrusted to them. It is considered a white-collar crime and thus does not usually involve violence. You must establish that a person was given access to an asset that was misused or stolen to prove embezzlement.

Businesses lose over $115,000 every year due to embezzlement. Nonetheless, small businesses with less than 100 employees lose the most money due to embezzlement. If you feel someone might be misappropriating your assets, you can click here and seek help from the experts.

Different embezzlement forms of embezzlement

Different embezzlement

Embezzlement does not have a single form. However, they can be broadly categorized into the following groups.

  • Stealing assets: Stealing assets is the most common case of embezzlement. From taking a computer mouse home to stealing several dollars, it can include tactics like siphoning, check kiting, and payroll and overtime embezzlements.
  • Ponzi schemes: Ponzi schemes are similar to kiting schemes, but they target individuals instead of companies. The fraudster will offer you exciting returns to get your money and fail to give you the promised returns. However, the fraudster may keep giving you the returns as long as the fraudster keeps getting money from the new investors.
  • Kickbacks: A kickback is the preferential treatment of an individual or a company, which may come in various forms. Some examples include a politician getting money for voting in a certain way or a manager getting money in exchange for a business deal.
  • Forgery: Forgery refers to creating documents without authorization for a fraudulent purpose. Fraudsters usually create fake documents for payroll-related scams.

Essential factors to legally prove embezzlement 

Proving embezzlement requires you to establish that the perpetrator failed a fiduciary responsibility. The following are the key factors to prove embezzlement.

  • There is a fiduciary relationship between the victim and the perpetrator, which establishes one party relies on another.
  • The perpetrator acquired the property through the fiduciary relationship.
  • The actions of the perpetrator were intentional and not the result of an error.
  • The perpetrator took ownership of the asset, transferred the asset, or destroyed or hidden the asset.

If you successfully prove that a person has embezzled money or some other asset from you, the individual may be held criminally and/ or civilly. The punishment for embezzlement may vary from monetary fines to imprisonment. 

Measures to prevent embezzlement

Following are some measures businesses can employ to prevent embezzlement.

  • Ensure transparency and responsibility in managing finances.
  • Create internal financial policies and ensure their implementation.
  • Ensure involving more than one person in finance-related matters.
  • Manage access to sensitive financial data to ensure that only key holders have access.
  • Have a legal team to take appropriate actions in case of embezzlement and other frauds.

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