What is the most common form of embezzlement? This is a question that many business owners may not know the answer to, but it’s an important one to ask. Embezzlement can occur in a variety of ways, and understanding the most common types can help you protect your business from financial losses. In this blog post, we’ll explore the different forms of embezzlement and provide tips on how to prevent it from happening in your organization.
Embezzlement is a form of theft that occurs when an individual, typically an employee, unlawfully takes money or property entrusted to them by their employer, business partner, or another person. The embezzler usually has permission to handle the assets but not to take them for personal use. Instead, they exploit their position of trust to convert the property into their own possession and control.
In today’s digital age, computer-related embezzlement has become one of the most prevalent forms of this crime. As a result, computer-savvy individuals working in IT departments often face allegations involving electronic manipulation of funds. Some common examples include:
- Electronically skimming funds from company sales and transferring them to personal accounts.
- Inserting logic bomb code into computer systems, allowing automatic transfers of money to personal accounts at specified times.
- Incorporating trojan horse programs into company systems, enabling authorized and unauthorized functions, including transferring money to personal accounts.
Another common form of embezzlement is negotiable embezzlement. Employees responsible for handling negotiable documents may be accused of stealing, altering, forging, or manipulating various items to acquire funds illegally. These items include refund authorizations, credit or debit memos, company checks, and customer money orders.
Wire transfer embezzlement involves intercepting, manipulating, or altering a company’s accounts to transfer money into personal accounts electronically. This can be achieved by modifying payment instructions on electronic or faxed documents received by the company.
Credit embezzlement occurs when employees misuse credit card numbers for identity theft and embezzlement. Whether accessing their company’s credit card information or that of its customers, employees obtain illegal cash advances on stolen credit cards.
Finally, cash skimming represents the simplest form of embezzlement. Employees involved in cash transactions, such as cashiers, bartenders, or wait staff, may be tempted to pocket small amounts instead of depositing them in the cash register or cash box.
Performing comprehensive background checks on potential employees is crucial. It is surprising how many companies fail to conduct proper screenings. If you use a recruiting company, ensure their background check aligns with your requirements and clearly state this in your contract. Pay attention to any liability limitations in the fine print to protect your business.
Regardless of the size of your business, establish clear procedures for employees accessing company credit cards or handling payments. Receipts or invoices should always accompany reimbursement requests. Never pay invoices from unfamiliar vendors solely based on an employee’s request. If in doubt, research the legitimacy of the invoice or contact the company directly. Maintain meticulous records of all transactions, including write-offs, refunds, and adjustments.
In small businesses, assigning all financial tasks to a single person may be tempting. However, this creates an environment where theft can go unnoticed. Instead, divide financial responsibilities among multiple individuals. For example, one person can handle opening mail and logging payments, while another is responsible for paying invoices and maintaining the books. In addition, having more than one person involved in these tasks facilitates identifying suspicious activities.
Regular audits convey to employees that fraud and theft will not go unnoticed. When employees know their employer’s vigilance, they are less likely to engage in embezzlement. Implement periodic audits to review financial records, identify irregularities, and deter potential perpetrators.
If you suspect embezzlement within your organization, seek legal counsel from an attorney experienced in handling embezzlement cases. They can guide you through the necessary steps to protect your business and ensure the situation is appropriately addressed.
Maintain strict confidentiality regarding the suspected embezzlement. Sharing this information with others may compromise the investigation or cause unnecessary panic among employees. Trust the guidance of your attorney and handle the situation discreetly.
When discussing the situation with involved parties, exercise caution in your communication. Be mindful of the information you share and choose your words carefully to avoid unintended consequences. Maintain a professional approach throughout the process.
What is the most common form of embezzlement that threatens businesses today? Knowing the answer could protect you. To safeguard your business from the devastating consequences of financial fraud, it is crucial to seek the expertise of a legal professional who specializes in combating embezzlement.
The Saltiel Law Group is a trusted firm experienced in handling embezzlement cases and protecting businesses from such risks. Contact us today at 305-735-6565 to learn how our expertise can help safeguard your business and its assets from the most prevalent forms of embezzlement.