Monday, January 2, 2017

Getting away with embezzling is not so easy


Just as with office affairs, those who embezzle are destined to get caught. But embezzlement carries an added caveat: You may go to jail.

Embezzlement is stealing, taking something that is not yours. Those who embezzle are thieves and lawbreakers. Often they want, or think  they need, something they can't afford. It can vary from making luxury purchases, such as trips or vacations and expensive personal items like jewelry to paying bills or helping family members. Addictions to gambling, drugs, shopping and other things can be the basis of the embezzler's actions.

Embezzlement occurs in many industries. Two of the most prevalent are the medical and financial areas, but it happens in all kinds of businesses, large and small. Often perpetrators will think they can get away with it. Yet a large percentage of them are fired from their jobs while a smaller percentage are prosecuted.

According to a study by the Boston consulting firm, Marquette International, the typical embezzler is someone in one’s late 40's with no prior criminal record. The study reported women represent two-thirds of the major embezzlements and that they typically act alone. However, statistically men are at a higher level in the company and get away with larger amounts.

What causes someone to commit fraud in the workplace?

Here are some:

Pressure/ Incentive — Pressures could be gambling, drugs, shopping addictions, too much debt, living a lifestyle beyond one’s means, desire for accumulation of goods a person cannot afford, or desire to provide material things for one’s family an individual cannot buy with his or her own income. The thief's motivation can be seeking payback or the feeling that the employer is not treating the person with respect of fairly. The individual feels the employer can afford the loss and thus rationalizes the need for it.

Opportunity — Embezzlers see what they perceive to be an opportunity and one they can exploit and keep secret. They circumvent established controls using others' identities and forge signatures on checks, create false invoices, issue unauthorized checks or make deposits in their own accounts.

Rationalization — Most who commit fraud in the workplace are first-time offenders, with no criminal background. They believe they are good people, "honest and decent." They justify and rationalize their crimes to themselves. They believe, since their acts are for "good reasons," it is OK. These acts can take place over extended periods of time without being detected but will eventually be discovered. Embezzlers are in denial. They start out by "borrowing" the money with intentions to pay it back but then something else comes up and they "dip into the till" again and again. It soon gets out of hand and they realize they are unable to replace the funds they have stolen.

What are the reasons people get away with embezzlement? The main reason is the trust they have built with their co-workers, employers and family members. They are often long-term, trusted and loyal employees. Their co-workers ignore protocol and routine security measures because of their trust of the individual. Big mistake!!! There is never a good enough reason to ignore dual control, security measures, checks and balances and other processes established by the business.

Steps a company can take to prevent embezzlement include:

Recognize it can happen in your business.
Process all receipts and disbursements through a checking account.
Create separation of duties.
Review all statements, bills and invoices.
Audit the books  internally and with external surprise audits.
Set up dual control procedures.
Reduce amount of cash on hand.
Don't throw away protocol because of friendships or trust of any individual.
Ensure second review of purchases from vendors and suppliers.
Remember, thefts, embezzlement and other losses will drain your business, so putting into place preventive measures is worth the time, effort and costs.

The best advice to all businesses is to prosecute the embezzlers, regardless of who they are or the position they hold in the company. Do not fall into the trap of feeling sorry for them. Don't be overly concerned about the negative PR for the company but more concerned about your reputation for not pursuing the offender to the fullest extent of the law. If not prosecuted, the embezzler will often go on to another employer and repeat the crime. Report it to the IRS. Ensure a thorough law enforcement investigation occurs. Attempt to get repayment, but if that happens, it should not negate the importance of prosecution for the crime.

According to a survey by the National Retail Federation and the University of Florida, "Shoplifting and other fraud cost U.S. retailers an estimated $44 billion in 2014. This includes inventory loss due to shoplifting, employee or supplier fraud and administrative errors." This is a report of retailers only, so when you add all the other business who experience losses, it is astronomical. Fortune reports retailers experienced shoplifting and worker theft of over $32 billion in 2015. Employee theft is referred to as "shrinkage." It has a huge impact on the profit margins of businesses and ultimately increases costs to all consumers on products and services purchased.

If you are involved in an embezzlement, stop it now. Go in to your manager, security department or owner and confess. Be prepared to immediately be suspended and eventually fired from your job. Also be prepared for the effect on your co-workers and family members. It is devastating. You are going to eventually get caught. Stop it before it gets any worse. There is not a good result in what you have done.  Take responsibility for your actions and provide full details to your employer regarding what you have done, who has been affected, if anyone else is involved, and other details.  It may reflect better on you for coming clean on your own.

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