What are the tactics behind embezzlement in corporations?


Embezzlement in corporations is a form of financial fraud where an individual, typically an employee or executive, illegally takes money or property entrusted to their care. Understanding the tactics used in embezzlement can help organizations detect and prevent such activities.

Common Tactics Behind Embezzlement:

  1. Misappropriation of Funds:
    • This involves diverting company funds for personal use. Employees might create fake invoices, overstate expenses, or write checks to themselves or fictitious entities.
  2. Skimming:
    • Skimming involves taking cash before it is recorded in the company’s financial records. This is common in businesses that handle a lot of cash transactions, such as retail stores and restaurants.
  3. Payroll Fraud:
    • This includes adding ghost employees to the payroll, inflating hours worked, or manipulating salary amounts. The embezzler collects the extra paychecks or the difference between the actual and inflated amounts.
  4. Kickbacks:
    • An employee might collude with a vendor to overcharge the company for goods or services. The vendor then pays a portion of the excess amount back to the employee as a kickback.
  5. Check Tampering:
    • This involves altering or forging checks to divert funds to unauthorized accounts. An employee with access to the company’s checks might change the payee name or increase the check amount.
  6. False Billing:
    • Creating fake vendor accounts and submitting fraudulent invoices for payment is a common tactic. The embezzler then directs the payments to personal accounts.
  7. Asset Misuse:
    • This includes unauthorized use of company property, such as vehicles, equipment, or credit cards, for personal gain. Over time, these unauthorized uses can accumulate significant losses for the company.
  8. Financial Statement Fraud:
    • Manipulating financial statements to cover up embezzlement. This can involve altering accounting records, delaying expense recognition, or overstating revenues.

Preventive Measures:

  1. Internal Controls:
    • Implement strong internal controls, such as segregation of duties, regular audits, and dual authorization for significant transactions. This reduces the opportunity for embezzlement.
  2. Regular Audits:
    • Conduct regular internal and external audits to detect discrepancies and ensure compliance with financial policies. Surprise audits can be particularly effective.
  3. Employee Training:
    • Educate employees about the signs of embezzlement and the importance of ethical behavior. Encourage a culture of transparency and accountability.
  4. Fraud Detection Software:
    • Utilize technology and software designed to detect fraudulent activities. Automated systems can monitor transactions for unusual patterns and raise alerts.
  5. Whistleblower Policies:
    • Establish and promote a whistleblower policy that protects employees who report suspicious activities. Providing a confidential reporting mechanism can help uncover fraud early.

For a more detailed exploration of the tactics behind embezzlement in corporations and strategies to combat it, visit this comprehensive guide: Scheming for Dollars: The Art of Embezzlement – Exploring the Tactics Behind Embezzlement in Corporations.

Understanding these tactics and implementing robust preventive measures can significantly reduce the risk of embezzlement and protect corporate assets.