Embezzlement refers to a form of financial fraud and white collar crime where a trusted person misuses organizational funds or assets for personal enrichment.
When it comes to embezzlement, embezzlers often have legal access to the assets they steal and it makes their actions harder to detect and more insidious.
Such crime can occur in virtually any type of organization like business, non-profits, government agencies or financial institutions and result in significant financial losses and reputational damage to the organization.
Embezzlement is not a new phenomenon as it has high-profile cases and real-world examples to show the scale and impact of this crime.
In this blog, we’ll be exploring how fraud and embezzlement works, share true crime stories, and look at key facts and figures to give you a comprehensive understanding of this form of financial fraud.
So let us get into that:
What are the mechanisms behind embezzlement?
Embezzlers are the kind of fraudsters who typically exploit gaps in oversight, misuse their power and trust placed in them to siphon money away from the organization. There are also possibilities that embezzlers may also collaborate and engage in money embezzlement with the external entities to cover their tracks and make detection even more challenging until the forensic audits uncover loopholes.
Such act can be done through:
Skimming of the cash: They are likely to record wrong data before it gets officially recorded in the books.
False invoicing: They make payments for fake goods or services that are further funneled to personal accounts.
Payroll fraud: They do it by creating ghost employees and inflating salaries just to increase the numbers.
Forging checks They also tend to misuse company credit cards which lead to drastic shock.
Expense report fraud: They also tend to claim fake and inflated business expenses (salaries, profit, employees, others).
The kind of methods which are explained above vary depending on the embezzler’s position in the company and how long they can keep their schemes hidden.
Although it depends on various factors as it happens from a person who is fully entrusted by the company itself.
What are some notable true crime stories that highlight major cases of money embezzlement and financial scandals?
In order to understand the real impact of embezzlement, let’s have a look at some of the most shocking true crime stories which are discussed below.
1. Rita Crundwell – The $53 Million Theft
Rita Crundwell who is the former senior financial officer of Dixon at Illinois who pulled off one of the largest municipal embezzlement schemes in the history of the U.S ever. This happened between the period of 1991 and 2012 where she embezzled more than $53 million from the small town.
The pattern of performing this activity was by creating fake invoices and funneling them back city funds into a secret bank account and then she used the looted money to finance a lavish lifestyle which included breeding championship horses as it is supposed to be rich people stuff and it was easier for her to make it look normal. She was sentenced to nearly 20 years in prison and Dixon sued its auditors for failing to detect the scheme following the case.
2. Bernie Madoff – The $65 Billion Ponzi Scheme
When the name of financial crimes gets mentioned, Bernie Madoff is the name who is well known in this regard. Moreover, he is best known for setting up a massive Ponzi scheme and his fraud involved significant money embezzlement and money laundering at the same time.
Let’s get into the details of what actually happened. In this case, the pattern of embezzlement was done by taking billions from his investors by falsifying financial records and pretended to generate high returns. He did this by using new investors’ money to pay off earlier ones. In short, he took money from one party and gave it to another. His scandals still prove to be one of the largest in history which ultimately collapsed in 2008. A Full stop was put because of the widespread financial devastation which resulted in his 150-year prison sentence.
3. Charles Keating and the Savings & Loan Scandal
Charles Keating was a chairman of Lincoln Savings and Loan in the 1980s. He is also one of the big names in financial crime, specifically in the money embezzlement case which misappropriated around $1.1 billion from the company. Additionally, he smartly used company funds for personal gains and risky ventures which caused a major financial crisis. The crisis led to the collapse of Lincoln and resulted in one of the largest taxpayer bailouts in U.S. history ever. One of the leading example of white collar crime
What are the most important facts and figures surrounding embezzlement?
Embezzlement can be a very difficult thing when it comes to prove in the court of law and it happens more commonly than expected. According to the estimation of The Association of Certified Fraud Examiners (ACFE), there are businesses which lose around 5% of their annual revenue to fraud. Only in 2022, fraud and embezzlement cases resulted in a $117,000 loss. Such kind schemes often go undetected for approximately 18 months, but in some cases like Rita Crundwell’s, last for years. Ultimately it varies on the approach of the fraudster that how smart he/she is opting for.
Are you worried about protecting your organization from the devastating effects of embezzlement and financial fraud?
Embezzlement and financial fraud can be a major cause behind severe damage to any organization but there are many effective ways to protect your business against these risks. AML Watcher offers its advanced tools to detect suspicious activities and prevent fraud which can help you to stay compliant and secure. With extensive coverage across 100,000+ data sources and 1,300+ watchlists,
AML Watcher is the solution you can trust for safeguarding your business. So try now and live risk free.