White Collar Crimes (Embezzlement)- Prevention and Detection

Topics: Theft, Crime, Embezzlement Pages: 6 (1837 words) Published: November 25, 2012
I’m here to talk about the dangers of embezzlement. Throughout my discussion I will discuss the underlying factor to the rise in the rate of embezzlement. We will also look at how a few big embezzlement schemes have influenced their business and their business’s industry. Because of this growing threat we will look at some factors that perpetrators are affected by that might influence him/her to commit company theft which can aid to help further prevent and detect company theft. Lastly I will discuss some preventable measures and steps companies can take to further detect criminal activity within their business, specifically employees who handle cash flow.

What is Embezzlement?
So what is embezzlement? The federal bureau of investigation defines embezzlement as the misappropriation or misapplication of money or property entrusted to one’s care, custody, or control.

Embezzlement in Businesses (What is Embezzlement?) – General and Relevant Facts All types and sizes of businesses can be victims to embezzlement (small/large businesses as well as non-profit and government entities).

Businesses have to be vigilant when dealing with criminal activity which is especially true for small businesses.

The Association for Certified Fraud has found that 39% of all fraud occurred in companies with fewer than 99 employees. Up to an astonishing 30% of small businesses fail due to criminal activity.

It is estimated that small businesses faces on average $190,000 loss due to embezzlement compared to the $159,000 for average sized businesses.

Why is it rising?
It isn’t a disputed fact that the rate of criminal activity increases during a time of economic recession and in difficult economic conditions, businesses are struggling to compete for fewer business opportunities. This creates an incentive for companies to deviate from proper business practices and engage in fraudulent activity to maintain revenue.

This idea can be depicted in this quote, “Some individuals, especially small business owners, become obsessed with a failing business endeavor, cannot walk away from it, and will go to ‘extraordinary’ measures to keep the business going” (Lindquist & Goldberg, 2009)

There was evidence of an increase in company theft during the economic downturns of 1987, 1991, and 2001. For example just after the savings and loans crisis in the 1990s arrests shot up by 52% and during the recession in the early 2000s criminal activity increased by 25%

From this we can conclude that there is definitely a correlation between a recession and a rise in embezzlement.

Impacts of embezzlement
According to David O’ Friedrichs, a criminal justice professor at University of Scranton stated “white-collar crimes have further, reaching, deeper and more lasting impact than street crime.” Thefts by employees are of the most costly problems facing new and existing businesses. Experts have shown company theft has the potential to reach 240$ billion dollars which includes intellectual property stolen during that year. It isn’t a surprise that the cost of embezzlement is two to three times than that of street crimes. Also 30-50% of all businesses affected by embezzlement fail. Other potential effects include increase in taxes, lost investments, and increase in unemployment.

Guarantee Building & Loan Association
On December 9th, 1930 Gilbert, the founder of Guarantee Building & Loan Association was found to have embezzled an estimated $8,000,000 which in today’s amount would be $100,000,000. Many local businesses and individuals were crushed by his embezzlement scheme. According to TIME Magazine “no less than 2,500 Guaranty depositors have gone to the poorhouse or the insane asylum, some 30 have committed suicide…” This example demonstrates the extreme ripple effects of a multi-million dollar scheme.

Commonwealth Building & Loan Association
During the winter of 1955, Minnie Magnum, the assistant...
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