Embezzlement, the misappropriation of funds by an employee, is a complex issue that often arises from a combination of psychological factors and opportunities within a company. In this blog post, we delve into the four-step process that can lead an individual to embezzle money and explore the underlying motivations behind such actions.

Step 1: Perception of Wealth Discrepancy

The journey towards embezzlement often begins with an employee perceiving a significant gap between their personal financial situation and the financial operations of the company. Studies suggest that most individuals are unaccustomed to dealing with large sums of money, as their personal budgets typically revolve around modest amounts. When exposed to a company’s substantial financial transactions, employees may experience a psychological shift, feeling demoralized or undervalued in comparison to the company’s financial status.

Step 2: Discovery of Access

The Fraud Triangle, a conceptual framework for understanding the factors that lead to fraud, identifies the second step as the discovery of access to company resources. Employees may accidentally stumble upon their ability to access company funds, whether through credit cards, check-writing abilities, or control over bank deposits. The realization that they can manipulate these resources often acts as a catalyst for further contemplation.

Step 3: The Need for Money

The second leg of the Fraud Triangle involves the employee experiencing a need for money. This need can manifest in various forms, such as financial difficulties, gambling problems, familial obligations, or sheer greed. The employee rationalizes that taking money from the company is a solution to their perceived problems or desires.

Step 4: Entitlement

The final step in the process is the development of a sense of entitlement. The employee justifies their actions by creating a moral or ethical framework that allows them to believe they deserve the money they are embezzling. This justification often stems from perceived slights, such as being passed over for a promotion, mistreatment by a superior, or a general sense of unfairness.

Breaking the Chain

Understanding these steps is crucial for employers looking to prevent embezzlement within their organizations. By implementing strong internal controls, treating employees fairly, and maintaining a positive corporate culture, companies can disrupt the progression towards embezzlement. It’s important to recognize that embezzlers are often long-term, trusted employees, making the loss not only financial but also personnel-related.

Embezzlement is a multifaceted issue rooted in the intersection of psychological factors and opportunities present in the workplace. Employers can safeguard their organizations by staying vigilant, fostering a positive work environment, and implementing robust controls that deter potential embezzlers. By addressing these underlying factors, companies can not only protect their financial assets but also maintain the trust and integrity of their workforce.