Embezzlement is a white-collar crime that occurs when someone entrusted with managing or overseeing another person’s funds or property misappropriates those assets for personal gain. According to the Association of Certified Fraud Examiners’s Report to the Nations 2020 Global Study on Occupational Fraud and Abuse, over 70% of those with embezzlement convictions are men.
This unlawful act can take various forms, each with distinct characteristics and methods.
Employee embezzlement
Employee embezzlement is perhaps the most prevalent type. It occurs when a person, typically an employee, misuses their position of trust within an organization to siphon off funds or property.
Check kiting
Check kiting is a deceptive practice where an individual takes advantage of the time it takes for a check to clear the banking system. Perpetrators open accounts at multiple banks and write checks between these accounts, creating an illusion of funds that do not exist. This allows them to withdraw money that technically does not belong to them.
Ponzi schemes
Ponzi schemes are notorious for their elaborate and fraudulent investment strategies. In this scheme, the perpetrator promises high returns to investors but uses funds from new investors to pay off earlier investors, creating the illusion of legitimate profits. Ultimately, the scheme collapses when there are not enough new investors to cover the returns promised.
Wire fraud
Wire fraud involves the use of electronic communications, such as emails or phone calls, to deceive individuals or organizations into transferring funds to fraudulent accounts. Perpetrators often impersonate trusted entities, such as banks or government agencies, to persuade victims to send money.
Credit card fraud
Embezzlers can engage in credit card fraud by misusing company credit cards for personal expenses. They may make unauthorized purchases or withdraw cash advances, leaving the organization to foot the bill. Credit card fraud is particularly challenging to detect when perpetrators use company cards sparingly to avoid suspicion.
Asset misappropriation
Asset misappropriation encompasses a wide range of schemes where an individual diverts an organization’s assets for personal use. This can include stealing physical assets, like equipment or inventory, manipulating accounting records to hide theft or redirecting client payments to personal accounts.
Intellectual property theft
Embezzlement can also involve intellectual property theft. Employees or associates may unlawfully use or sell a company’s trade secrets, patents or copyrighted materials for personal gain.
Embezzlement is a complex and multifaceted form of financial crime. While these types of embezzlement represent common scenarios, each case is unique and may involve a combination of tactics.