Types of Financial Fraud in Business

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Fraud, both at the consumer and business level, is all too common in today’s society. In fact, according to a recent report by the Association of Certified Fraud Examiners, nearly half of all small businesses experience fraud at some point in their business lifecycle and it will cost these organizations an average of $114,000 per occurrence. To make matters worse, the fraud is usually committed by a “loyal” employee.


Too often, a business owner finds out too late that even their most valued employee has been committing financial fraud and stealing from the company. When times are tough, as they have been in the last several years, people may resort to desperate measures and/or behave in ways that may seem to be quite out of character. The result? Dipping into the corporate account, skimming off the top of the books, and helping themselves to more than they are entitled to. Business fraud, however, does not just occur at the hands of an employee.


If you believe your business has been the victim of financial fraud, keep reading…


What are Some Examples of Financial Fraud?


Also called larceny, embezzlement is the illegal use of funds by a person who controls those funds. A common example of this is a bookkeeper who uses company money for personal needs.


Internal Theft

Often the culprit behind inventory shrinkage, internal theft is the stealing of company assets by employees. In the eyes of the law, to steal means to take another person’s property without permission or legal right and without intending to return it. Internal theft can include taking something as seemingly trivial as office supplies to the unauthorized taking of larger company assets.


Payoffs and Kickbacks

At first glance, it may appear that the employee is bringing in more business. In reality, a payoff / kickback situation often means that the company is paying more for the goods or products than necessary because the employee is accepting cash or other benefits in exchange for access to the company’s business. In other words, the employee wins and the company loses – financially.



Taking cash off the top, or skimming the books, occurs when employees take money from receipts and don’t record the revenue on the books.


Of the four types of financial fraud described above, the one that hits small businesses in Los Angeles the hardest, and most often, is embezzlement. If you believe that your business, no matter the size, has been the victim of financial fraud, contact the experienced business litigators at BIKLAW today.


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