About Embezzlement

Embezzlement is the most common form of white collar crime. The mental image of embezzlement is often that of a secretary disappearing into the desert with a suitcase full of money. But most real-life embezzlement is conducted using bookkeeping. Embezzlement is a very common crime that can often be easy to get away with.

Significance

Embezzlement is a crime that costs Americans more money than most forms of larceny. Due to this fact, many might argue that embezzlement and other white collar crime should be more aggressively prosecuted than other crimes. But since instances of embezzlement usually do not include violence, the punishment for embezzlement is not usually as severe as punishment for more petty larceny.

Identification

Embezzlement occurs when an individual working for another individual is entrusted with money. Instead of using this money for its intended purpose, the embezzler steals the money or uses the money for his or her own purposes. This can occur within a corporation or in a one-on-one relationship between a client and a provider.

Types

In some cases, embezzlement can be conducted and concealed through creative bookkeeping practices. An accountant can set up a program to deposit money in an account while changing the numbers to make it seem as if the company never had the money in the first place. An individual can also write out checks without permission or create phantom employees with paychecks that are sent to the embezzler. Another very common form of embezzling is to over-exaggerate the costs of a particular operation and then steal the excess funds.

Effects

Embezzlement can be very harmful to businesses, but the business owners and shareholders aren't the only ones effected. Businesses might be forced to raise prices on goods and services. These businesses might also have to lay off workers that they can no longer afford to pay. Embezzlement also has an effect on the tax system. Embezzlers have to pay taxes on the funds embezzled, even if those embezzled funds are later returned.

Prevention/Solution

There are some ways that embezzlement can be prevented in a company. One way is to have oversight. For instance, each accountant should be regularly observed by senior accountants. Another way to prevent embezzlement is through a division in duties. If tasks are designed so that they require two individuals to carry out one tax, both individuals have to collaborate in order for embezzlement to occur. Also, many law enforcement agencies have task forces that specialize in white collar crime.