Embezzlement Definition

What Is Embezzlement?

Embezzlement is using assets within your control for unintended purposes. It is different from theft in that the assets are lawfully in your possession. The crime occurs when you use those assets to benefit yourself instead of using them as intended.

Embezzlement is a form of fraud and often involves a breach of fiduciary responsibility.

Key Takeaways

  • An embezzler obtains assets legally but uses them in an illegal way
  • A money manager taking money from your trust fund and spending it on their own personal expenses is a typical example
  • You can face both criminal charges and civil liability (in some states) for embezzlement
  • Embezzlement can be a misdemeanor or a felony

Understanding Embezzlement

Embezzlement can encompass a lot of behavior. For example, an embezzler can be someone who “borrows” money from a trust or bank account they have control over. Even if they intend to pay it back they can be charged with a crime.

Embezzlers often take money gradually over time to avoid suspicion. Sometimes, embezzlers just need money and intend to pay it back once they have covered their own expenses. This can look legitimate, and it not always easy to catch. But whether you take a lot all at once or a little over time, and whether you intend to pay it back or not, it still qualifies as embezzlement.

It is important to note that embezzlement requires a relationship between the embezzler and the person with the assets. The assets need to be entrusted to the embezzler. Otherwise, it is considered a different crime.

Embezzlement can involve assets such as:

  • Money and credit cards
  • Real estate and property
  • Company cars, computers, or phones
  • Stocks, securities, or fake investments

Embezzled assets can be transferred into a normal checking account or through a third party. For example, embezzlers may try to hide funds in offshore accounts and use fake names or companies to hide their activity. Increasing computer crimes and technology make embezzlement an evolving crime.

Preventing Embezzlement

Companies and organizations often use security, monitoring, employee reporting, tip lines, or audits to ensure funds and assets all make it to their rightful spot. Risk management teams have entire roles focused on watching assets, vetting employees, and monitoring things like money and equipment.

To prove embezzlement occurred, you typically must be able to show some of the following:

  • There is a fiduciary responsibility or a level of trust in the relationship
  • The assets were acquired legally through the fiduciary relationship
  • The asset intentionally didn’t go to the correct place
  • There is a breach of trust, duty, or responsibility

The chance of recovering money increases the earlier a case is discovered. Embezzlement can cost companies millions of dollars, and not all victims see this money returned.

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