Maybe it is because I have been in the accounting world for so long that I take for granted the number of times I have heard of this embezzlement or that embezzlement. Each of their modus-operandi can be a tad different, but usually they all fall into one of a few known strategies. At its core, embezzlement is simple theft, yet how the embezzler carries out their theft can be a spectrum of machinations. Some schemes are quite technical and complicated, others are simply labor intensive, while some simply show the laziness of the embezzler – and for that matter quite possibly anyone who is responsible for keeping an eye on the books.
I, however, want to delve briefly into an area that may help you identify a potential embezzlement before its damaging effects are too far along. I am concentrating on the “Why”. In the simplest terms, “Why did he/she, who I hired, I’ve known for such a long time, I put my trust in, steal from me in such a devious manner.” More importantly, what are the indicators that subtly express the “Why” right before your eyes. Having an eye (or a nose) for some of these basic indicators could be paramount to stop any embezzlement before it becomes irreversible.
Yes, greed for the most part, is the reason “Why” people steal. As noted in a previous blog, companies should set up a commensurate level of controls to better stave them off from becoming a victim of embezzlement. Sadly, but all too common and easy, these controls are often watered down because of the trust factor. Embezzlers take advantage of people’s trust. When someone trusts someone, the need for verification seems to melt away to avoid the inherent awkwardness of, “Hey, I trust you, but I have to verify some of your work.” Gaining the owner’s, President’s, or Chief Financial Officer’s trust is a prime opportunity for the embezzler to strike. But let’s stay on target as to why do embezzlers do what they do and what are some of their characteristics that may tip you off as a business owner.
Below are just a few areas to consider:
- The Control Freak: Employees who, while having control over your books and records, also never take days off, never take vacations, and stringently control all areas of their work. In other words, they vehemently prevent anyone from doing their job. They may even work exceedingly long hours. This gives the impression that, “Hey, I (the Owner) give all the accounting stuff to Eddie the Embezzler (no offense to the “Eddies” out there) because I do not understand it, nor do I have time to. Eddie has been with our company for years handling all of the accounting stuff.” Embezzlers, once they have crossed the line of stealing, further enhance their crime by concealing it; However, with that, comes the responsibility to keep control of the books so as to not raise any suspicions from anyone else covering their job for a day, week, or two weeks.
- My Life Outside of Work is a Mess: Outside distractions and family problems – i.e.: Overwhelming Debt! Certain embezzlers display a personality of depression or feeling down when they come to work. This is not to say that because your receptionist is feeling a little blue he or she is prime for an embezzlement investigation, but it is to say that someone in your accounts payable/receivable who displays a persistent melancholy may be apt to attempt to solve their problems by helping themselves to the company till.
- I am such a Giving Person: “Oh, Sheryl in accounting just bought a new Mercedes and is always giving us presents. She is so generous!” For the most part, as a business owner, you or your partners or some of your trusted employees are aware of the annual income of the employees. It does not take much for your gut to notice when you see an employee taking grand vacations, buying a nice car, or living in a palatial residence. Granted, some of the employees may have a wealthy spouse/partner, and thus, their dual income is enough to pay for such pleasures. But, keep an eye on this, because embezzlers who fit this description tend to go overboard. Their expenditures outweigh their income, or even the income of many others. They embezzle, not necessarily for the money, as much as they do for the adulation.
- Because It’s There: This is more remote in my opinion, but some embezzlers will employ a scheme because they simply can, and the money is available. In small operations, controls may not be set up to adequately limit waste, fraud, and abuse. One bad day, and the embezzler, out of opportunity, narcissism, or a combination of the two, decides to start the scheme. This is a more difficult personality to pick up on, given there is no noticeable change in personality or attitude. The key here is to have some levels of internal controls.
- Scatter Brain: The scatter brain is someone who, to some degree or another, pretends they are so overwhelmed with their responsibilities, they have payments, journal entries, adjusting journal entries, and receipts all over the place. Somewhere in the midst of all of this is the embezzlement. In other words, they purposely sabotage the books to make such a mess over a period of time that any thought of reconciling is virtually remote. Obviously, this is not a long-term plan nor is it something we see a lot of. In most cases, the embezzler is truly inept at their job and simply take advantage of their inadequacies. As the owner, you would most likely take action because your books are a mess before you would because you have caught an embezzlement. All in all, messy books are sometimes a symptom of embezzlement.
All in all, embezzlers are nothing more than thieves. What makes embezzlement so interesting are the different schemes of embezzlement – the lengths they will go to, the complexity of their schemes, the outright sinister attitude to carry on a scheme for so long and lie to so many people they know and presumably like. Aside from how embezzler’s employ their scheme, to me, why they enact their scheme is just as or almost more important. Is it for money they need for debt, or is it for self-aggrandizement, or is it because the money was ripe for the taking. Above are some indicators that you should be aware of that may tell you the “Why” before the scheme is too far along down the road.