Brazen Fraud and Theft, Part 3 – Embezzlement  

by | Jun 11, 2024

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If you're a business owner, I bet you’ve been told you should be forecasting. This traditional advice suggests that there is a specific model to follow or a manual to use. However, as you and I both know, the reality is that when life gets in the way, your forecasting...

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Welcome back to our series on brazen fraud and theft. So far, we’ve covered the all-to-common disasters of cash crimes and the nauseating audacity of phishing and check fraud. To round off our series, we’re diving into embezzlement.   

Embezzlement makes an exotic, exciting (or funny) topic for Hollywood. The Firm, Office Space, Catch Me If You Can and The Wolf of Wall Street are all big-screen favorites. (You can check out our past blog here on Hollywood accounting heroes.) In real life, this form of financial fraud is far from sexy and has a runtime much longer than 120 minutes. Embezzlement can simmer undetected for years, eroding the financial foundation of a business from within. Read on for a real-life example Fritz Financial Solutions uncovered and our tips to keep this plot line from taking over your business.   

Embezzlement  

Unlike the brazenness of cash crimes, embezzlement often operates in the shadows, perpetrated by trusted employees or partners who exploit

their positions to divert funds for personal gain. Embezzlement occurs when an employee or partner takes money or assets within their control and uses them for a different purpose than for what they are intended. This fraud can take the form of forged checks, creating false invoices that are paid directly to the employee or partner or using company funds for personal expenditures.   

Recently, we worked on a project where we did a “QuickBooks clean up” for a company that had no bookkeeping or reporting for the past two years. We discovered that a new business partner given access to the bank account had applied for several loans and credit cards using the company’s tax ID number and his wife’s name. The embezzler used the credit cards to pay for jewelry, concert tickets, lavish vacations and other personal expenditures, while the balances were paid with company funds! The money received from the loans was also used to pay credit card balances and, in some cases, transferred directly to the partner’s bank account. These expenditures and transactions occurred over the course of about 18 months.  

Embezzlement might not be immediately obvious, but regular scrutiny of your business’s financial transactions can reveal suspicious patterns. Third-party financial partners are equipped to spot irregularities that might indicate embezzlement. They’re here to protect your business by closely monitoring your finances and identifying potential fraud before it can cause extensive damage.  

Had any third party or employee been overseeing the finances, they could have easily detected this type of theft and brought it to the co-owner’s attention. Instead, over $400,000 was embezzled from the client!  

Get Peace of Mind with a Strong Financial Team 

Thanks for tuning into this series on brazen theft and fraud! If you’re ready to strengthen your financial processes, contact Fritz Financial Solutions. From QuickBooks clean-ups to long-term partnerships, we’re committed to securing your financial health against embezzlement and other forms of financial theft. We’re here to review your strategies and keep you in the loop on all your finance-related matters, helping you spot any suspicious activity, hopefully before it becomes a major headache.  

  

Traditional forecasting can be a losing endeavor  

If you're a business owner, I bet you’ve been told you should be forecasting. This traditional advice suggests that there is a specific model to follow or a manual to use. However, as you and I both know, the reality is that when life gets in the way, your forecasting...

Understanding Financial Accountability  

"I'm not here to give you the good news."  I say that phrase to clients much more often than you might think. Because I ultimately want to celebrate their business's success with them, I’m there to tell them the actual state of their company's finances and guide...

Trust and Commitment in a Remote Team 

A couple of months ago, I made my first overseas trek since 2017 – not for vacation – but to meet with the rest of the Fritz Financial Solutions team of accountants in the Philippines. It was important to me to show these women the time and attention needed to...

Client Spotlight: Andrea Freidman 

As a business owner, one of the most significant challenges to overcome is work-life balance. This dilemma has only been exacerbated over the last several years and forced many "traditional" industries, such as the legal profession, to change their ways. Long before...

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