Embezzlement: A look at the secret crime

Campbell, Jack B . Credit Union News ; New York  Vol. 15, Iss. 10,  (May 19, 1995): 7.

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ABSTRACT
 
As the most popular financial crime in the US, embezzlement is often extremely difficult to discover, is frequently
misunderstood, hard to investigate, and often difficult to successfully criminally prosecute. Embezzlements
generally will be committed using one of 3 methods: 1. trickery, such as impersonation or fictitious accounts, 2.
documents, or 3. technology. The most common motive for taking money is to support a particular lifestyle,
followed closely by the seeking of revenge against an employer. The most efficient way to deal with embezzlement
is to take the steps necessary to prevent it. Therefore, a credit union's systems should be evaluated and properly
modified to be as secure against embezzlement as possible. The steps to be taken in order to do something about
the problem of embezzlement include: 1. Become better informed about the true scope of the problem. 2.
Recognize and understand the symptoms or common denominators displayed by embezzlers.

FULL TEXT
 
Many credit union personnel tend to view the idea of embezzlement with denial that such a thing could ever
happen at "our" CU. In fact, embezzlement is so uncomfortable a topic for most financial industry personnel that
law enforcement authorities regularly refer to embezzlement as a "secret crime."
Few want to talk about it before the fact. Even fewer want to discuss it openly after the fact. But, the reality is that
embezzlement accounts for the majority of all financial industry crime investigated by the FBI. This makes it an
issue that must be considered by your credit union.
Your credit union's ability to attract and retain qualified personnel and customers is directly related to its
professional image and reputation. Since this reputation is based on trust, confidence, and the appearance of
safety and soundness developed over time, one of the fastest ways to lose it all is to become the victim of an
embezzlement.
So, despite the queasiness your personnel may feel at openly addressing the possibility of embezzlement, such a
discussion must take place. You must educate all levels of your staff to the facts and indicators of embezzlement
and then build effective countermeasures into all at-risk areas of your operations.
* HARD TO UNCOVER
For this discussion, "embezzlement" will be considered to be any willful misuse or misappropriation of assets
entrusted to the care of your CU's employees. As the most popular financial crime in the nation, embezzlement is
often extremely difficult to discover, is frequently misunderstood, hard to investigate and often difficult to
successfully criminally prosecute.
Most embezzlements are a series or combination of crimes rather than a single incident. Most embezzlements
begin as a simple short-term misuse of the CU's funds for personal purposes, then escalate into habitual misuse to
hide the original crime.
And, even though embezzlements are secret crimes, many times someone else in the CU will have knowledge of
the wrongdoing.
Embezzlements generally will be committed using one of three methods:
* Trickery: impersonation, fictitious accounts.

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* Documents: checks, collateral, power of attorney.
* Technology: computer, fax, ATM.
While embezzlements committed by staff-level employees are more numerous, these tend to be relatively small
loss amounts. The embezzlements committed by credit union officers and supervisors are less frequent, but the
losses tend to be extremely large.
* KEEPING UP WITH THE JONES'
The most common motive for taking money is to support a particular lifestyle, followed closely by the seeking of
revenge against an employer.
Information compiled from loss-surveys and from law enforcement authorities shows that embezzlement
accounts for the largest portion of all losses from business crime--more in fact than from all other business crimes
combined.
These thefts-from-within are becoming more frequent due to several factors: insufficient pre-employment
screening, devolving morality in today's work force, lessening law enforcement emphasis, insufficient punishment
of offenders.
With embezzlements involving both misuse and misappropriation, it is difficult to determine the exact scope of the
embezzlement problem. This is further hindered by fewer than 10 percent of embezzlements being reported to
authorities. Why is this the case?
First, many embezzlements involving misuse--rather than outright theft are extremely difficult to prove and are
often simply categorized as mysterious disappearances.
Secondly, the reporting of an embezzlement immediately involves local law enforcement authorities and generates
a crime report which may be available to the media. The responsibility for investigating the crime, as well as the
decision for any eventual disposition, is taken away from the credit union.
Since an informal settlement of an embezzlement involving voluntary termination of the culprit and repayment of
losses is often chosen as the most desirable solution by an affected CU, the crime report and subsequent criminal
justice system involvement are frequently foregone.
Third, with embezzlement being commonly viewed as the same sort of secret crime as sexual assault, there is a
common pattern of victimized CU's choosing not to report an incident to authorities due to feelings of denial, a
sense of shame, and simple embarrassment at having allowed such a thing to have happened.
* SERIOUS RESULTS
With the recent examples of huge losses suffered because of a variety of embezzlements within the savings and
loan industry, the defense contracting industry, national charitable institutions and others, it has become evident
how quickly and thoroughly businesses can be crippled, discredited, and destroyed by the very people who work
within and manage them.
The most efficient way to deal with embezzlement is to take the steps necessary to prevent it. Waiting until after
an embezzlement has occurred is up to five times as expensive as simple prevention. Added to the base loss of
the actual crime are the costs of identifying the method of the crime and the perpetrator, the costs of prosecuting
the perpetrator, and the costs of suing the perpetrator in an attempt to recover the lost assets.
Beyond the tangible costs of an embezzlement are an assortment of equally important consequences that can
continue to affect the operations of a victimized CU for three years or more after the incident: reduced employee
morale coupled with mutual distrust, reduced efficiency due to disorientation, disrupted normalcy of activity due to
investigation, negative publicity from reportage of incident and investigation, and disruption caused by criminal
justice system interactions.
* EVALUATE SYSTEMS
With prevention being by far the most cost-effective method for dealing with the potential of embezzlement, your
credit union's systems should be evaluated and properly modified to be as embezzlement-proof as possible.
A successful anti-embezzlement program will include provisions for distinguishing acts of honest error from
attempted embezzlements, for giving the training and supervision necessary to shield the CU from both mistakes

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and embezzlements, and for including the safeguards to protect honest employees from suspicion and
accusations of dishonesty.
The road begins with the determined action of one concerned employee to take a stand against the problem. He
must become knowledgeable and concerned enough to persuade others to take a stand. And, he will likely find
both supporters and detractors at all levels of the institution.
For your CU to protect itself from embezzlement, all your staff must acknowledge the magnitude and
pervasiveness of the problem, commit to a belief that this activity is simply intolerable, and begin to take an active
role in prevention and education efforts.
* STEPS TO FOLLOW
If you are truly concerned about the embezzlement problem, consider taking the following steps:
* Become better informed about the true scope of the problem.
* Recognize and understand the symptoms or common denominators displayed by embezzlers.
* Recognize the windows of opportunity sought by embezzlers.
* Prevent or reduce losses by closing these windows.
Embezzlers violate all accepted standards of business and personal morality. They are rarely prosecuted
criminally; rarely receive jail sentences upon conviction; and rarely repay victims or court costs. Their acts, like
disease, will consume an institution if allowed to go untreated. These criminals do not favor one type of institution
over another; banks, thrifts, and credit unions alike are all prey to their attacks.
However, embezzlement--like a disease--is treatable. Prevention, early detection, and prompt treatment can all be
accomplished by a determined CU. As you learn more about the criminal act of embezzlement and about the
people who commit these acts, you will grow to be better prepared to identify both the institutional and the
individual behaviors common to embezzlement. This is the first part of a three-part series. The second part will
examine methods for the early identification of an embezzler.

DETAILS

Subject: Prevention; Embezzlement; Credit unions; Bank management; Bank fraud

Location: US

Classification: 9190: US; 8120: Retail banking services; 5140: Security management; 4300: Law

Publication title: Credit Union News; New York

Volume: 15

Issue: 10

Pages: 7

Number of pages: 1

Publication year: 1995

Publication date: May 19, 1995

Publisher: BKB Publications, Inc.

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 Place of publication: New York

Country of publication: United States

Publication subject: Business And Economics--Banking And Finance

ISSN: 01999311

Source type: Trade Journals

Language of publication: English

Document type: Feature

Accession number: 00267086

ProQuest document ID: 201076131

Document URL: https://search.proquest.com/docview/201076131?accountid=17242

Copyright: Copyright BKB Publications, Inc. May 19, 1995

Last updated: 2014-05-18

Database: Accounting, Tax &Banking Collection

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