What is Embezzlement?

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Embezzlement is a form of financial fraud in which the person committing the crime is in a position of trust. We refer to the person who commits embezzlement as an embezzler.

The embezzler, who might be an employee or agent, does not steal using force, fear, or violence, but rather by taking advantage of their privileged position. The embezzler has legal access to the funds but uses that access for an unintended purpose.

The Cambridge Dictionary has the following definition of “embezzlement”:

“The crime of secretly taking money that is in your care or that belongs to an organization or business you work for.”

Many forms of embezzlement

The crime can range from a sales assistant in a store pocketing cash from the register to a company executive who diverts millions into personal accounts. The amount stolen is irrelevant, what matters is the misappropriation of funds entrusted into somebody’s care.

Defining embezzlement

The following conditions must be met for a crime to be considered embezzlement:

  • There must be a fiduciary relationship between the two parties. In other words, the victim has entrusted their money or other assets to the perpetrator with the expectation of proper (honest) use and return.
  • The property must be acquired through this fiduciary relationship only, not in some unrelated manner.
  • It must have been intentional, that is, done deliberately, with the purpose of permanently depriving the owner of their property.

Penalties

Embezzlers, if they are caught, may face a fine, restitution, and even imprisonment. Restitution means paying back the stolen funds. The severity of the punishment depends on the scale of the embezzlement.

An embezzler at his desk stealing money, plus a definition of embezzlement.
Image created by Market Business News.

Preventing embezzlement

If you are entrusting people to handle your funds, you need to have systems in place to prevent embezzlement. Here are some tips:

  • Background Checks: Always check a candidate’s references thoroughly before employment.
  • Regular Audits: Schedule surprise and routine financial audits.
  • Segregation of Duties: Divide financial responsibilities among multiple employees.
  • Use of Technology: Use software to monitor transactions for unusual activity.
  • Internal Controls: Create strict rules for handling financial processes.
  • Employee Education: Train staff to recognize and report embezzlement.
  • Surprise Checks: Perform unexpected checks on financial records.
  • Cultural Integrity: Promote a workplace culture of honesty and open communication.
  • Bonding Employees: Get insurance coverage for employees in financial roles.
  • Bank Reconciliations: Have bank accounts regularly reconciled by an independent party.
  • Limit Access: Restrict access to financial data to only those who need it for their work.

Derivatives of “embezzle”

The word “embezzlement” is a derivative of “embezzle.” Let’s look at some derivatives, their meanings, and how we can use them in a sentence:

  • Embezzle (verb)

To steal or misappropriate money one has been trusted with.
Example: “The accountant was caught trying to embezzle funds from the company.”

  • Embezzler (noun)

A person who embezzles money.
Example: “The embezzler was sentenced to five years in prison for her crimes.”

  • Embezzlement (noun)

The act of embezzling money or property.
Example: “Embezzlement of company funds is a serious offense that can lead to legal consequences.”

  • Embezzling (verb, present participle)

The ongoing action of misappropriating funds.
Example: “He was caught embezzling money from the charity.”

  • Embezzled (verb, past participle)

The past action of having misappropriated funds.
Example: “The funds were embezzled over a period of two years.”