Embezzlement

A crime involving an individual or legal entity who misappropriates assets entrusted to it

What is Embezzlement?

Embezzlement is the purposeful stealing, retention, or misuse of funds and/or assets entrusted to an employee by an employer or organization. In embezzlement, the embezzler obtains assets legally, but the assets are used for unintended purposes.

 

Embezzlement

 

Understanding Embezzlement

Embezzlement occurs when a criminal takes or uses money from a company or an agency without consent. A criminal can take small amounts of assets over a time to prevent administrators from noticing, or they can take a large amount at once and use various methods to cover up the crime.

The criminal wrongdoing sometimes involves moving funds from one account to another or writing fake checks to ensure that the missing money goes undetected. In some cases, embezzlement can take several years before the owner or finance department discovers the illegal activity.

 

Types of Embezzlement

Embezzlement takes several forms. For example, some embezzlers go undetected for years, “buying from above” the funds they use to control. This means that they take small amounts of money from a large fund over a long period, hoping that the missing amounts will go unnoticed. In other cases, the person will immediately take a large amount of money, and then try to hide the stolen funds or even disappear altogether.

Embezzlement is generally considered a white-collar crime, but there are smaller types, such as withdrawing money from the cash register before balancing it at the end of the shift and adding additional hours to an employee’s schedule.

Other forms of embezzlement may be more personal. If someone cashes theirs or a relative’s Social Security check for personal use, he/she may be charged with embezzlement. If someone “borrows” money from a parent fund, sports league, or community organization, he/she may also be charged with the same offense.

 

Is Embezzlement a Felony?

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.

 

Related Readings

CFI offers the Certified Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and developing your knowledge base, please explore the additional relevant CFI resources below:

  • Cash Larceny
  • Fraud Triangle
  • Forensic Audit Guide
  • Ponzi Scheme

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