Table of Contents Expand. What Is Embezzlement? Understanding Embezzlement. How Embezzlement Occurs. How to Prevent Embezzlement. Embezzlement FAQs. Key Takeaways Embezzlement takes place when a person uses funds for a different purpose than they were intended to be used. Embezzlers might create bills and receipts for activities that did not occur and then use the money paid for personal expenses.
Ponzi schemes are an example of embezzlement. Embezzlers can be held civilly and criminally responsible for their crimes.
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Investopedia does not include all offers available in the marketplace. Related Terms What Is Defalcation? Defalcation is the misuse of funds by a trustee but also refers to a flawed accounting practice of consolidating debt into a single, total debt. White-Collar Crime Definition A white-collar crime is a non-violent crime committed by an individual, typically for financial gain.
What Is Securities Fraud? Securities fraud is a form of white-collar crime that disguises a fraudulent scheme in order to gain finances from investors. The Bernie Madoff Story Bernie Madoff is an American financier who ran a multibillion-dollar Ponzi scheme that is considered the largest financial fraud of all time.
Fiduciary Negligence Fiduciary negligence is professional malpractice when a person fails to honor his or her fiduciary obligations and responsibilities. Partner Links. Related Articles. Investopedia is part of the Dotdash publishing family.
Your Privacy Rights. To change or withdraw your consent choices for Investopedia. Companies have created safeguards to protect against embezzlement. For example, they invented cash registers to ensure that gross sales equal the deposit at the end of a given day. Companies also divide duties between levels of employees as a form of oversight. Embezzlement in the face of split duties adds the difficult requirement of forming a collusive arrangement and likely requires split proceeds, lowering the payoff for each member of the arrangement.
See White-collar crime. Please help us improve our site! No thank you. LII Wex Embezzlement. What should you do if you suspect fraud? Exploratory interviews with management should be undertaken, and then expeditiously map out a strategy to minimize a company-wide morale problem, as well as to make sure news of the fraud does not leak to the media, competitors or even investors.
In these situations, always assume the suspect is innocent until the facts prove otherwise, as that may spare you from a potential lawsuit by your employee down the road in the event he or she is innocent, as, often, anonymous allegations against an employee are unfounded. This is a great time to interview the suspect and others, not in an accusatory manner, but from a fact gathering standpoint. You just want to understand what happened and who could have been involved.
The suspect may have an alibi, or may dig himself into a hole. Further, you may learn of other accomplices. March Violante. Max Pecherskyi.
Alp Mimaroglu. Julia Weikel. Skip to content Profile Avatar. Subscribe to Entrepreneur. Magazine Subscriptions. By Ken Springer May 5, Opinions expressed by Entrepreneur contributors are their own.
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