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Embezzlement costs businesses and consumers

Embezzlement is stealing — taking something that is not yours. The person is a thief and lawbreaker. 

Often the person wants, or thinks 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.

Embezzlements occur 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. They are ultimately destined to be caught.

According to a study by the Boston consulting firm Marquette International, the typical embezzler is someone in their late 40s with no prior criminal record. The study reported women represent two-thirds of the major embezzlers 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 a person to commit fraud in the workplace? Following are some of the most prevalent reasons.

• Pressure/Incentive — Pressures could come from addictions like gambling, drugs and shopping  as well as 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 they are not being treated with respect or fairly. The individual feels entitled and that the employer can afford the loss and thus rationalizes their need for it. They may feel they deserve more than the employer pays them for their work and therefore justify the dishonesty to themselves.

• 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 themselves to be  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 often 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. They become insensitive to their wrongdoing and continue with less “pricking of their conscience.”

This is why the saying, “Let your conscience be your guide,” does not always work toward motivating people to be honest and do the right thing. Their conscience becomes numb to their dishonesty.

What are the reasons people are able to 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, regardless of who is involved or their position. People who are honest and forthright in their dealings will insist on checks and balances. For honest people, they are aware that it protects them and the business. Beware of employees who are defensive about checking.

Steps a company can take to prevent embezzlement include:

1. Recognize it can happen in your business.

2. Process all receipts and disbursements through a checking account.

3. Create separation of duties.

4. Review all statements, bills and invoices.

5. Audit the books internally and with external surprise audits.

6. Set up dual control procedures.

7. Reduce amount of cash on hand.

8. Don’t throw away protocol because of friendships or trust of any individual.

9. 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.

Ultimately because of losses to embezzlements, shoplifting, etc., prices are increased to consumers. So all the honest customers wind up having to pay more for goods and services because of those who commit fraud.

There are rules, laws and commandments against these actions. Why do people perpetrate these acts?

1. They are operating from the passions of greed. It is a very strong emotion that blinds the person to the consequences. Greed is the lust for money or wealth.

2. The persons think they won’t get caught or are above the law. They spend a lot of time thinking through the act and how to carry it out in secret and cover.

Remember that thefts, embezzlement and other losses will drain your business so putting into place preventive measures is worth the time, effort and costs.

Message to businesses:

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 public relations for the company but instead be 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 their 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 (NRF) 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. Both are growing problems in America.

Message to embezzlers:

If you are caught up in an embezzlement, take charge of your life and step up by making some tough decisions to do what is right, right now. Clarify your motives and seek help. Admit to your actions and begin to take steps to get your life back on track. If you are involved in 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.

Living your life with deceit and lies will have a huge impact on your emotional and physical well-being. It destroys relationships and ultimately leads to a disastrous ending. Coming to grips with your actions and the impact it has on yourself and others is the first step. 

Rebuilding a life and repairing relationships will not be easy. It will be slow as you have damaged any trust others have in you due to the embezzlement. 

There are so many scriptures in the Bible regarding the sin of stealing. Look to God’s guidance for the steps to take in repairing and healing. Don’t expect everyone to be forgiving. 

A sincere change in beliefs and actions will be the basis from which to begin to move forward.

Life will never be the same following discovery of a fraudulent act. This is certainly true for the perpetrator but also true in the business. Building trust is a slow process in both situations, but a new beginning is the goal for all parties.

Becky Vaughn-Furlow retired from Trustmark Bank as executive vice president and human resources director. She can be contacted by emailing bvaughnfurlow@gmail.com.