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 When a company discovers that its assets have been embezzled, it is essential to conduct an in-depth investigation. This type of investigation should include an analysis of the company’s financial records and processes, an assessment of its internal controls, and other measures such as interviewing current and former employees. Additionally, it is important to consider the potential legal implications of any findings. A comprehensive embezzled assets investigation will help ensure that the company can take appropriate action to recover its losses and protect itself from similar situations in the future. 

Understanding the Embezzlement Process 

 When conducting an embezzled assets investigation, it is important to understand how embezzlement occurs in order to effectively analyse the situation. Generally speaking, there are three stages of embezzlement:

-Misappropriation 

-Conversion 

-Concealment. 

 

Misappropriation

 Misappropriation includes activities such as using company funds for personal use or taking cash from the business without permission. Asset misappropriation is a serious problem facing businesses worldwide. It can range from small incidents of theft (such as ‘’borrowing’’ office supplies) to large-scale fraud schemes in which significant amounts of money are embezzled from the business. The consequences of misappropriation can be severe, including significant financial losses and reputational damage. Organisations must take a proactive approach to combat asset misappropriation and mitigate misconduct risks.

 

Conversion

 Conversion refers to the act of turning illegally acquired gains into other types of assets, such as cash or securities. It also involves transferring funds from one account to another without authorisation or forging documents. Conversion is a way to hide misappropriation and makes it difficult for law enforcement and auditors to detect illegal activity. It is important for companies to prevent asset conversion by implementing strict internal controls and having strong corporate governance practices in place. This will discourage individuals from taking wrongful action in the first place. 

 

Concealment

 Finally, concealment refers to hiding or destroying evidence of misappropriated funds or falsified documents. When embezzled funds are hidden, they are often hard to trace or recover without the help of an expert. All types of assets can be concealed from creditors, financial institutions, law enforcement or anyone else seeking the assets for whatever purpose. Concealment and conversion are linked together as one is used to help the other. Attempts to disguise embezzled funds can vary from simple techniques such as transferring ownership of money through multiple entities to more complex practices like creating imaginary businesses or altering accounting information in order to mislead investigators. A successful conversion will lead to successful concealment. 

 

The Impact of Embezzlement on Businesses 

 Embezzlement can have a big impact on a business, both financially and reputationally. In most embezzlement cases, the embezzler is someone in an upper management or trusted position such as a director or accountant. As such, the embezzler typically has access to large amounts of money, or has control over how funds are spent. The company may not realise what has been stolen until months or years later, when the embezzler is not part of the company. This means that there will be little to no chance of recovering any stolen money. Sometimes businesses may choose to take legal action if they have enough evidence, which then causes more costs to incur. The ponzi scheme of Allen Stanford went undetected for over two decades and the damage reached an estimated value of $8 Billion USD.

 On top of lost funds, embezzlement can also lead to loss of customer loyalty due to feelings of distrust. The public may view the company negatively if word of embezzlement spreads due to decreased trust in its integrity and reliability. Customers do not want to do business with companies that seem untrustworthy. They want to deal with organisations that are ethical and discourage illegal behaviour. Businesses may also face legal ramifications if they fail to investigate embezzlement properly. Depending on state laws or country laws, businesses may be liable for any embezzled funds and could face hefty financial penalties or even jail time for those involved in embezzling.

 In addition, embezzlement can also have an emotional toll on businesses by hurting relationships between employees and management alike and reducing employee morale. Employees will feel betrayed by their fellow colleagues while management may feel unprepared as they did not catch the embezzler sooner and angry at themselves for not being able to stop it from happening in the first place. Employees may not feel safe at work, they may feel that they work for an unethical company with corrupted upper management. It can take numerous steps including thorough background checks, regular financial audits and secure accounting systems before employees regain trust in their employers again.

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Conducting an Embezzled Assets Investigation 

 When a company suspects that its assets have been misappropriated or converted without authorisation, it is important to take quick action in order to mitigate further losses and preserve evidence for potential criminal prosecution or civil litigation. Investigations into embezzled assets are unique and require sophisticated strategies to uncover stolen funds or assets. In some cases, embezzlement can go undetected, so it is essential to create an embezzlement investigation plan that will lead to an effective process. 

-Finding the right person to investigate

-Gathering evidence

-Reaching a conclusion and retrieving funds

-Reviewing company policies

 

Finding the right person to investigate

 To investigate embezzled funds, the company has to find a team of experienced professionals who have knowledge and expertise in this area. The right people will conduct a thorough search for the missing funds, investigate all potential leads and use their investigative tools to trace the money. Depending on the scale of the investigation, a company may choose only one individual rather than a team. It is advised that an external investigator is hired in this scenario as an internal investigator may have a conflict of interest or may be involved in the case without the management knowing. 

 

Gathering evidence

 Once an investigator has been found, the process can then begin by gathering facts to determine if embezzlement has actually occurred. During the fact-gathering process, the investigator should begin by researching the history and background of the case as well as interviewing potential witnesses. In the case of embezzlement, the culprit could be anyone so witnesses can arise from different levels of the company. If you want to read more on how to conduct a successful interview, read our article that explains it in depth.  

 Through this process, investigators can learn more about the embezzling parties involved in the case and any methods used to embezzle funds. Once identified, investigators can leverage many tools such as forensic accounting software and other investigative databases to identify trends, anomalies, or suspicious activity which may be indicative of embezzling activities. Examples of this could be different dates on documents or metadata showing edited documents by using unauthorised software. 

 In addition to gathering facts, investigators must also have a thorough knowledge of both federal and state laws that relate to embezzlement investigations. Depending on the nature of the embezzlement case, there may be additional legal issues that need to be considered such as employee privacy rights or labour laws. State laws may require specific protocols in order for information gathered during an investigation to be admissible in court or accepted as evidence. As part of an embezzlement investigation plan, the investigator(s) must also develop strategies for collecting evidence securely while ensuring that data is collected legally and ethically.

 Our clients use Polonious to store their evidence securely and safely. We follow strict standards and laws and regulations to ensure that our system meets the highest quality. Through our case management system, our customers can upload videos, images and other files related to the investigation. They can link all relevant documents to a specific case to make it easier for the people responsible to access them. If you want to learn more, request a demo

 

Reaching a conclusion and retrieving funds

 Once sufficient evidence has been collected and reviewed, investigators must then identify what remedial action needs to be taken in order to recover embezzled funds or assets. When the culprit has been identified, the company should ensure they have adequate information to build a case against them.

 Recovery efforts need to begin in order to retrieve any lost funds from perpetrators through criminal prosecution or civil litigation if necessary. Successfully recovering losses from embezzlers requires experienced investigators who understand how to leverage their resources towards identifying financial discrepancies and obtaining incriminating evidence that can be used in court proceedings against those responsible for embezzling funds or assets from an organisation. Recovery of embezzled funds need to begin as soon as possible to maximise the chances of the assets returning to the business. 

 

Reviewing company policies

 Every investigation highlights areas for improvement. An investigation into embezzled funds allows the business to review its internal control systems and processes for weaknesses that could have enabled employees or others with access to corporate accounts to commit fraud or theft without detection. 

 This may involve establishing new clear policies regarding internal fraud prevention measures or implementing procedures for handling financial transactions more securely. As part of a comprehensive embezzlement prevention strategy, businesses should also consider conducting regular financial audits conducted by a third-party auditor in order to detect potential cases of embezzlement before they cause serious problems for the organisation. 

A few things to remember

 Conducting a comprehensive embezzled assets investigation is critical for businesses that suspect their assets have been misappropriated or converted without authorization. This type of investigation should include a review of financial records and processes as well as interviews with current and former employees in order to understand what happened and prevent similar incidents from occurring in the future. Additionally, companies should consider any potential legal implications stemming from any findings uncovered during their investigations so they can appropriately address them if necessary. Taking all these steps will help ensure that businesses can recover their losses as quickly as possible while minimising any reputational damage caused by these types of incidents.

 Polonious specialises in many types of fraud investigation workflows. We have a proven track record of integrating our case management system with detection software and we can save your business time associated with processing simple cases. Our system generates automated templates and reports from decision forms and provides our customers with easy updates on the case. Polonious can be accessed from anywhere, anytime and offers faster turnaround times. If you want to know more, reach out, we are happy to chat!

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