The crime of embezzlement is most often carried out in an employer/employee situation because of the authority given to the violator by the owner of the property. This does not necessarily mean it has to be through employment, but any form of relationship where trust is given to someone else to watch over your property.
There are three components that are essential for a case to qualify for embezzlement charges. If any of the three parts are not satisfied, then these charges would not apply to the case. The three necessary components of embezzlement are:
While in a position of trust and confidence, the person was trusted with possession of property belonging to someone else.
That person took the property, or hid the property, or somehow converted it to your own use without the owner’s consent to do so.
The had to have intended to do these acts to permanently take ownership enjoyment away from the owner.
The general description of the crime leaves a wide range of activities that can fall under this class of crime. It can be from a small scale operation at a local shop, but can also become a huge operation as part of a large multi-state or multi-national organization.
Types of Embezzlement
Examples of Types of Embezzlement
There is an unlimited number of ways that a person could commit the crime of embezzlement. By going over the six main types, a better understanding of the crime can be achieved by looking at examples of each of the types.
This is accomplished by the people that we see working on the front line in stores or restaurants. They devise a way to pocketing money from the register without creating discrepancies between what the computer shows and what the drawer shows. They do not enter the item into the computer part of the register, but need to keep track of how much money they get after their shift is over.
In this practice, the criminal makes a series of deposits and withdrawals between several banks. The checks grow in value gradually, drawing and withdrawing money from the other banks with money that is not real. This takes advantage of “float” which is the amount of time it takes for deposited checks to clear their home banks. A person that handles the bill paying function at a corporation would be able to do this crime. He could use the company checkbook to get the scam started and progress it until the banks realize what is happening.
This type is found in the part of the business that accepts incoming payments from customers or vendors. A person working in this capacity for a church, for example, could use bank deposits for several companies and change the allocation of the funds to cover up their own personal taking of certain cash payments from certain customers. This accumulation of funds obtained while in a trusted position of fiduciary responsibility would quality as a money laundering crime.
Using the company payroll in order to illegally take money is another type of embezzlement. A large scale corporation will often have a manager and possible an entire department just involved in the calculation and completion of the payroll duties within that company. If that manager decided to try to steal some money through this crime, he would add some of his family members that are not employed with the company, maybe his wife and/or kids, and have them drawing income against the company. At home, then, he would be able to cash each of the checks himself, increasing his level of income.
Any people involved in purchasing activities in any organization could be prospective embezzlers through kickbacks. This involves a vendor, from whom the company purchases materials in their course of business, agrees to give that employee money, directly to them, if they continue to buy a certain product from that vendor. Often times these situations involve inflated prices, since the vendor agent is possibly trying to make some personal profit as well.
Another way that people can commit embezzlement is through the falsification of overtime records. An hourly-paid manager for the local branch office of the bank could do this. If he punched in his card at the beginning of his shift, and then left at the end of his regular shift, say eight hours later, without punching his card out. Suppose he comes back in two hours later, pretending to have forgotten his wallet, and secretly punches his card out then. If the manager is continuing to do this over time, he is guilty of embezzlement by falsifying his overtime records.
Embezzlement is considered an intentional and/or methodical crime. In the United States, certain elements must be established for a prosecutor to charge a person with the crime of embezzlement. This is also true for other crimes, although the exact elements required for such charges vary.
Lawyers and courts consider certain elements when a person is charged with the crime of embezzlement, and if one or more of them are missing, the charges may be changed to larceny or stealing. The elements include the following:
The defendant must understand that he committed a crime by taking possession of money or property. If the person does not realize that the act was wrong, it can lead to another accusation. For example, theft is the act of stealing from another person, which is different from embezzlement.
A person accused of embezzlement should not assume that the money or property rightfully belongs to him. The crime consists of the unlawful deprivation of a person’s property. For example, if a person takes small cash from the cash register, sincerely believing that it is there for the company meals, it is not considered embezzlement. The individual believes that it is what the cash should be used for.
Another element of the crime is intent. For a person to be found guilty of embezzlement, he/she must have purposely taken possession of money or property to defraud the owner of the business. If a person took assets intending to return them, it is not considered embezzlement, but may be considered fraud or larceny.
The defendant must’ve been entrusted with money or property. For example, stealing cash from a grocery store checkout by one of the sellers is more theft than embezzlement because the seller was not entrusted with the company’s finances. However, if the accountant of a grocery store chain takes money from the cash register for personal use, it is considered embezzlement since the accountant was in charge of the company’s finances.
Categories of Embezzlement
There are several categories of embezzlement. Depending on the category, an embezzlement charge can be a state crime, federal crime, or both.
Public Money, Property, or Records
This category of embezzlement involves the misappropriation of anything of value that belongs to the government of the United States, any of its agencies, or any organization which is operating under contract of the government. This category of embezzlement may be either a state or federal offence depending on whether federal assets were embezzled or state assets.
Accounting Generally for Public Money
This type of embezzlement is specific to embezzlement by federal employees, agents, or officers. Like all types of embezzlement, punishments vary according to the value of the embezzled assets. In this case, if the value exceeds $1,000 you may face up to 10 years in prison and a $250,000 fine.
This category is specific to employees of U.S. federal courts. If you fall into this category and embezzle more than $1,000, you may face a fine of up to $250,000 or the amount embezzled (whichever of the two is greater), and 10 years in prison.
Theft By Bank Examiner
This category of embezzlement law deals with embezzlement by bank examiners and assistant bank examiners when the property embezzled belongs to any bank that is part of the federal reserve system or is insured by the FDIC. If found guilty, individuals may face a fine of up to $250,000 and 5 years in prison.
Employee Benefit Plan Embezzlement
Anyone who embezzles money from any type of employee benefit plan is subject to this category of embezzlement. Penalties include a $250,000 and up to 5 years in jail.
Theft of a Major Artwork
It is a federal crime to fraudulently obtain any artwork or other important piece from a museum if the value is over $100,000 or the item is more than 100 years old. Embezzlement of this kind would likely be dealt with in federal court and would carry a maximum penalty of 10 years in prison and/or a $250,000 fine
Common Embezzlement Schemes
Although the number of methods used to commit the financial crime of embezzlement is only limited by the embezzler’s imagination, there are a number of techniques that are considered the most common embezzlement schemes used by embezzlers. Is your accounting management system open to fraud? It may be more open than you think. Employees may misuse or misappropriate funds or property in a variety of ways.
1. Using company assets for personal gain
Using the company’s telephones, copy machines, and mail services for personal business.
2. Stealing company assets
Wiring funds from the company’s or customers’ accounts to secret personal accounts.
Stealing cash or negotiable documents from another employee’s area of control.
Creating “ghost” or non-existent employees for the company’s accounting system for payroll purposes.
Converting titles to “double-ordered”, abandoned or stored company property, then selling the property; Burglarizing the company’s premises, dual-custody containers, and safety deposit boxes.
3. Forging or altering company’s documents
Particularly signature cards at financial institutions, powers of attorney, money orders, travelers and cashier’s checks made payable to the company.
4. Manipulating account balances
Using on-line computer systems, and making “adjustments” to accounts, particularly dormant accounts.
5. Hiding assets
Merchandise, cash, computer data and account information can be hidden in the company’s garbage container for retrieval by a confederate.
6. Establishing fictitious accounts
This includes phony loans, lines of credit, and other related types of credit frauds.
7. Accepting and holding favors
Holding “favorite customers” and employees’ post-dated checks, until they can make a corresponding deposit to the paying financial institution, for a fee.
8. Assisting a friends in operating credit for a fee
Assisting a customer or another employee in operating credit, interest and check kites, and “bust-out” schemes, for a fee.
9. Short-changing customers during any transaction.
Not counting out exact change correctly is obvious, but a ticket taker can take your ticket and then resell it later.
10. Secret unsecured, personal loans from “favorite customers”
Although the number of methods used to commit the financial crime of embezzlement is only limited by the embezzler’s imagination, this listing highlights embezzlement risks and the techniques most frequently used in common embezzlement schemes.
Source 2: https://corporatefinanceinstitute.com/resources/knowledge/other/embezzlement/
Source 3: https://www.defenselawyerfederalcrime.com/embezzlement/categories-of-embezzlement/
Source 4: https://www.bizmanualz.com/tighten-accounting-controls/what-are-common-embezzlement-schemes.html