How do embezzlers siphon money and conceal their theft?

How Embezzlers Siphon Money and Conceal Their Theft

Embezzlement is no joke—it’s a serious crime that can land you in prison. But how exactly do embezzlers get away with stealing money, sometimes for years without getting caught? Well, they often use clever and complex schemes to siphon funds little by little, and then cover their tracks. Let’s break it down.

Getting Access

First things first—embezzlers need access to money that isn’t strictly theirs. This often happens through work—they’re in a position of financial trust. Examples include accountants, bankers, financial advisors, attorneys, and executives at companies or nonprofits. They’re given authority to handle money for their business or client. And they find ways to abuse that authority for personal gain.

Sometimes they’ll exploit gaps in oversight. Like if one person is supposed to approve payments, but that person is overwhelmed or just not detail-oriented. The embezzler can sneak things by them. Other times the embezzler may have set up the financial systems themselves, deliberately building in vulnerabilities that they can later take advantage of.

Siphoning the Money

Once they have access, embezzlers use all sorts of tricks to siphon money. They try to make it happen gradually and inconspicuously, so it doesn’t set off alarm bells. Some common tactics:

• Padding expense reports – Adding a little extra onto legitimate business expenses for themselves.
• Payroll schemes – Adding fake employees to the payroll and pocketing their “paychecks.”
• Check tampering – Altering payee and amount info on checks after they’ve been signed.
• Fake invoices – Creating invoices from vendors for services that were never provided.
• Credit card abuse – Using company cards for unauthorized personal purchases.

Often they start small, stealing just a little at first. But as they get away with it, the amounts increase. Some embezzlers manage to steal millions over many years this way. They get greedy and just keep going.

Concealing the Fraud

To cover their tracks, embezzlers use a variety of tricks:

• Forging documents – They may fabricate paperwork to make the fraudulent transactions appear legitimate.
• Moving money between accounts – They’ll transfer funds between various accounts to obscure the money trail.
• Cooking the books – They’ll falsify accounting records and financial statements to hide shortfalls.
• Destroying records – Shredding documents that could incriminate them.
• Lying – If questioned, they’ll deny, deny, deny. They’ll blame mistakes on incompetence or computer glitches.

Sophisticated embezzlers create elaborate shell companies or charities to move money into, or open accounts under fake names. They enlist co-conspirators to help them execute schemes and provide cover. The more complex the financial maneuvering, the harder it is to unravel.

Why Embezzlement Often Goes Undetected

There are several reasons why embezzlement often goes unnoticed for so long:

• Trust – No one suspects the accountant who’s been with the company for years, or the church treasurer who seems so devoted.
• Poor oversight – No one person is reviewing all transactions, just their own area.
• Lack of transparency – Finances aren’t open for all to inspect.
• Complexity – Sophisticated schemes are tough for laymen to unravel.
• Cover-ups – On the surface, the books are cooked to appear fine.
• Small amounts – Taking modest amounts reduces chance of detection.

Often it’s not until there’s a major financial audit, or a tip from an employee, that massive embezzlement finally comes to light. And often the embezzler has moved on by then, only to repeat their schemes elsewhere.

Notable Embezzlement Cases

Some of history’s most brazen embezzlers managed to siphon huge sums before getting caught:

• Rita Crundwell – A small town Illinois comptroller embezzled $53 million over 20 years to fund her horse breeding business, before a co-worker tipped off the FBI.
• Allen Stanford – This Texas financier bilked investors out of $8 billion in a Ponzi scheme and used the money to fund his lavish lifestyle.
• Barry Minkow – As founder of ZZZZ Best carpet cleaning, Minkow defrauded lenders and investors of over $100 million by creating phony documents and sales.
• Brian Sabatino – Working for Olympus America, Sabatino embezzled $35 million through fake supplier invoices and by rerouting customer payments.

As you can see, embezzlers can siphon astounding sums when they have access, get creative with their schemes, and conceal the fraud through complex accounting tricks. While some get caught eventually, many escape with their ill-gotten gains if oversight remains lax.

The scary thing is, for every high-profile case, there are surely dozens more small-scale embezzlements happening under the radar every day. Employers must be vigilant about putting checks and balances into place. Because as long as greed exists, so too will those willing to steal by abusing positions of financial trust.