What Is Embezzlement?
You've probably seen news articles or clips from regional or national newscasts discussing business partners, politicians or everyday people arrested for embezzlement. But what is embezzlement, exactly?
Essentially, embezzlement is when people use property entrusted to them in ways that aren't authorized. A person might embezzle money or goods from an employer or the government. Some cases involve a friend or relative.
Embezzlement cases have been taken as far as the U.S. Supreme Court. That court set an official embezzlement definition that describes this crime as the fraudulent appropriation of property by someone who was initially entrusted with that property.
In simple terms, it means the perpetrator was given something such as cash, a credit card or actual goods and used it for their own benefit instead of for the intended purpose. This could mean spending cash intended for business supplies on personal items or selling items from inventory on the black market instead of putting them on the store shelves.
The big difference between embezzlement and theft is whether the person committing the act was initially given the property under the presumption it would be used for a specific purpose. Taking money from the register without permission qualifies as theft. Being given cash from the register to deposit at the bank and then spending it elsewhere qualifies as embezzlement. In the second scenario, the person was entrusted with the money and used it inappropriately.
Embezzlement is considered a white-collar crime because it's nonviolent and typically involves deception of a company, organization or individual for personal gain. The crime of embezzlement often carries legal penalties, including prison sentences, fines and the requirement to pay back the money. Some people use money laundering tactics to hide the source of embezzled funds, which adds another potential crime to the overall act.
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There are a few types of embezzlement. In some cases, it's a subtle crime, and the amounts of money or goods are so small that it becomes difficult to identify the loss as theft. Other cases of embezzlement involve a large amount of money taken all at once. In these situations, the person often disappears with the money to avoid capture.
This kind of embezzlement occurs when someone uses money for a different purpose than what was assigned or intended. Embezzled funds might have initially been provided to purchase company supplies or pay for a business event but were used for personal purchases.
In this type of embezzlement, the person keeps some or all of a legitimate payment instead of transferring it to the register. This is often found in retail settings when employees overcharge for an item or inaccurately ring up payments in cash registers on purpose. Siphoning can also be done digitally by transferring a small amount of money from a company account into a personal account.
When someone clocks into work but doesn't actually do any work that day or logs overtime but leaves at their normal shift's end, this is considered payroll embezzlement.
These complex schemes are a type of fraud where a high-return investment is pitched to investors, but the system is funded only by pulling in new investors, not through any actual business activities.
This kind of embezzlement takes place when someone uses items given to them for any purpose other than the intended purpose. Using a work-provided computer as a personal device falls under this definition.
Cases of embezzlement can cost companies millions of dollars. Businesses and organizations that want to prevent embezzlement may put systems in place to monitor money and assets within the company.
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