embezzles

Embezzlement is the act of illegally taking or using money or property that has been entrusted to another person’s care, typically in a position of trust such as an employee, officer, or agent. It involves conversion of the property for personal use while the offender continues to hold or manage it, often under the color of legitimate authority. Embezzlement differs from theft in that the perpetrator initially has lawful possession of the assets.

Common schemes include skimming cash, payroll fraud, creating fictitious vendors or inflated invoices, improper expense reimbursements, transfer of assets to personal accounts, and misappropriation of inventory or company assets. Embezzled funds may be concealed through falsified records, complex journal entries, or off-balance-sheet transactions.

Legal aspects: Embezzlement is generally treated as a crime in most jurisdictions and is often categorized as a form of theft or fraud. Penalties depend on the amount involved, jurisdiction, and degree of offense, and may include imprisonment, fines, and restitution. Civil liability and disgorgement can accompany criminal penalties.

Detection and prevention: Effective internal controls reduce risk, including segregation of duties, required dual approvals, regular bank reconciliations, independent audits, supplier verification, and data analytics to identify unusual patterns. Whistleblower hotlines, strong governance, and routine audits help deter embezzlement and support early detection.

Impact: Embezzlement undermines trust, distorts financial statements, and can threaten the solvency of individuals or organizations, with consequences for employees, shareholders, and stakeholders.