Embezzlement Stings

What You Need To Know…

There are many forms of embezzlement schemes that deprive companies and shareholders of capital, embarrass management and lead to potential default or total ruin. Recent FINCEN estimates place the cost of these crimes at approximately $3.6 billion per year to U.S. businesses. The key embezzlement crime profile varies:

  • A key manager or officer diverts funds to a third-party company that provides no real benefit to the victim company. The third-party company is a dummy company controlled by the manager or officer. These schemes typically run for more than a year and have a median cost of $200,000;
  • An employee in accounting creates dummy companies and dummy invoices to undertake the same embezzlement scheme as above with essentially the same outcome;
  • An employee or manager substitutes their own bank information for the bank payment information of a vendor, depriving the vendor of payment and the victim company of capital. These can be very expensive as the lost payment must still be made and the lost funds can be difficult or impossible to recover.
  • An employee or manager of the victim company approves an invoice (or series of invoices) to a vendor who does not perform the required obligations of the contract, but shares the proceeds with employee at the victim company. The results are essentially the same as above.

The use of external audits reduces the cost of these crimes but does precious little to prevent them. Placed in the larger context of invoice phishing scams and other forms of fraud, the question may not be whether or not you are exposed, but have you already been hit and don’t even realize it?


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