EMBEZZLEMENT - WHAT'S NEXT????

This embezzlement surprised even me.  In this technological age, internal controls to prevent embezzlement cannot be overemphasized.  Beware of where the door of temptation is left open for anything to happen......even with your own bank!

This embezzler created a bogus business.  The owner of record for this fake business was the embezzler's own mother and the business claimed to be a supplier of building materials. This bogus company set up a bank account at the same bank as the embezzler's employer, a homebuilder.

Can you spot the setup??

The embezzler would electronically transfer money from her employer's bank account to her mothers faux business.  In this day & age, this was a difficult one to spot especially since the transaction was covered on both ends.  The embezzler signed nothing, just authorized the bank to tranfer funds to the faux bank account.  The fake company received the money, had the right name and purpose on record to be a supplier of building materials....even created fake invoices!   Nothing about this transaction seemed out of order.

The employer relied heavily on the bookkeeper/embezzler and trusted her implicitly.  She made his life so much easier and he was thrilled that she "took care of everything".  She was so competent and efficient that her employer gave her complete signature authority over his bank account - from checks written to electronic transfers!  She and her very own mom were partners in crime.  Brilliant scheme....nearly foolproof?

Ohmigod!

What could employer have done?  The employer should never, never, never...did I say NEVER....hand over total authority of his bank account to anyone** Consider need+opportunity=(potential) embezzlement.  This employer made it so EASY for the needy bookkeeper-turned-embezzler to xfer funds with the intention of "borrowing money and paying it back later, when her financial situation improved.  In this particular case, the owner hired a CPA firm to review their records and bookkeeping system.  The owner knew something was wrong as he was always short on company funds and he knew his business was profitable.  Fortunately, the embezzler did not have enough time to embezzle enough money to devastate the owner. 

Remember:  An embezzler will go to extremes to appear to be anything other than a thief.  Everything appears in control and in place and...just right...too right!  If you have someone that comes to you and talks about having financial needs, they are probably not the embezzler.  The embezzler is usually someone who "appears" to have it all together...with the hopes of fooling you.  It happens more often than you think.

Is this a hiring issue or internal control issue?  Who is responsible?  Does the bank ultimately have any responsibility?  If so, to what extent?

**Except under extraneous circumstances like disability, accident, death, etc. that prevents owner from working.  Typically family & an attorney are involved.

NEXT UP:

Let's look at when a bank has liability.  Could the bank have prevented it?  If so, how?

DON'T BE THE NEXT VICTIM!!

Comments

[Janet]

What you say is so true, my husband lost his company while in the middle of a $1m contract when his secretary decided to embezzle $150,000. Oh yes she was prosecuted but even then she only had to pay back $50,000 in $1,000 per month increments. She still owes $13,000 and this has been 14 years ago. The courts cannot do anything or should I say won't do anything. It is a white collar crime and they behave as if there job is done when the person's trial is over. NEVER, ever let anyone sign a check for you. Look at your own bank statements BEFORE anyone else does yes this means while the envelope is still sealed. Check your account on line periodically just as a back up. Have seperate people to do accounts receivable and accounts payable if at all possible.

[Anonymous]

I was an embezzler and got away with it for 10 years. Only after I quit my job and we had a child was I approached about the money. The former employers gave me an amount to pay back that they "thought" was close. I did but they really had no idea as to how much I really took. In reality is was probably 3 times as much. Your description of me is very accurate. What he could have done to prevent it was actually just to do is own job as the owner. He got lazy and I got stupid. I will never do it again simply because of the way it made me feel. I had to work longer hours to cover my tracks. My wife often wondered where the money was coming from so I had to cover my tracks there. I took on projects that drove me crazy again to cover my tracks. I had to always be on top of the mail to make sure that I got the bank statement beforehand because back then they sent the checks back to you. I had to constantly look at the accountant records and dreaded tax time every year. Was it easy--sort of, was it worth it---never. I should have been prosecuted but the owner worried more about his reputation. Today I am glad he saw more in me than I did myself. I wound up losing my wife and child as a result of this. Again I state, if the owner does his job correctly it makes it difficult, if not impossible, for a person to embezzle.