7 types of embezzlement to know about

Embezzlement is a form of fraud that involves a trusted person defrauding an individual or company of funds or assets. In this post, we’ll look at what type of crime embezzlement is and explore some examples of embezzlement fraud.

What is embezzlement?

Embezzlement occurs when an entrusted individual or individuals intentionally withhold an asset or assets to use for their own means. There are many different types of embezzlement violations in the UK, which has seen an upward trend in fraud and embezzlement cases over the last few years.

For a crime to be categorised or termed as an “embezzlement case,” there are three criteria that the case must meet.

1. The offender must have been in such a position of trust with which they were responsible for assets or property that belonged to someone else.
2. There must have been a clear intention to remove an asset’s enjoyment of ownership from the legal owner.
3. The offender used or intended to use assets belonging to someone else for their own benefit.

Is embezzlement a type of fraud?

Embezzlement is a type of asset misappropriation fraud or property theft. The act of embezzlement usually involves one or more offences under the Theft Act 1968 or the Fraud Act 2006, which can result in serious penalties.

Examples of Embezzlement

Whilst there are many examples of embezzlement in the country’s court system today, the following are some of the most common.

1. Payroll

This type of embezzlement is where a company or employee uses the company’s payroll system to facilitate their criminal activity. Usually, in large companies, a department will look after this area of the business, or it may be just one manager. The embezzlement is often achieved through a type of payroll fraud known as ‘ghost employee fraud’, where a fictitious employee is created so that the fraudster can, for example, claim wages on their behalf.

2. Siphoning

This is a crime which is committed by someone who has direct access to money paid to their employer, such as a shop assistant or waiter. It typically occurs when someone with money-handling duties accepts a payment but doesn’t register the transaction, and pockets the money instead.

3. Falsifying overtime records

This example of embezzlement can occur in factories or places of work where one might have to submit a timecard to record the hours they have worked.

An employee might ask a co-worker to clock them into or out of a shift that they do not work, or that is beyond their typical scope of work, in order to benefit from pay or overtime without working for that time. Some companies now avoid this issue by using biometric authentication (such as a fingerprint scanner) to ensure that the employee was indeed on site when they said they were.

4. Charity embezzlement

Charity embezzlement occurs when an employee or volunteer of a charity (or other person trusted with funds) handles charity funds improperly. They might take charity money for themselves or use official credit cards for unauthorised payments. See other examples of charity fraud on our dedicated page.

5. Cheque kiting

This example of embezzlement is where the kiter makes a series of deposits and withdrawals between multiple banks, taking advantage of the time a cheque takes to register with the bank and show on the balance. The kiter varies the amounts they deposit and until it is stopped (either by the bank or by the kiter), there is no way to tell that cheque kiting has taken place.

6. Lapping

This type of embezzlement can occur when an employee of a company alters an account in order to conceal stolen cash. Lapping differs from siphoning because the fraudster takes money from a customer account to cover the fraud. Like kiting, this can create a chain in order to continue concealing the thefts.

7. Ponzi scheme

This occurs when a financial advisor or planner (or someone posing as one of those) guarantees a high return investment to an individual, but instead of investing said monies, the advisor will just keep it. Of course, even when there is no embezzlement taking place, Ponzi schemes are a form of investment fraud themselves.

Of course, these are not the only examples of embezzlement. The key factors are that the fraudster is in a position of trust or responsibility, and that they are abusing that trust in order to profit.

Like all financial frauds, embezzlement cases can be complex and drawn out, and it’s important to instruct an experienced barrister as soon as possible to support your case. If you or your client have been investigated for or accused of embezzlement, please get in touch with us at St Pauls Chambers.