Misappropriation can be understood as the unlawful, improper or unauthorised use of funds. In other words, it can be understood as ‘stealing’ of money from bank account or funds or other property for personal use.
Under the New South Wales Crimes Act, (1900) fraudulent misappropriation is a criminal offence. It has a maximum penalty of imprisonment of up to seven years. Asset misappropriation fraud can occur when an employee steals from within the organisation for personal interests.
Notably, misappropriation includes cash theft such that the cash flow of an organisation suffers. It cannot involve stealing of physical assets like stationery items.
Sometimes, employees may make false expense claims. Payroll fraud and data theft are also examples of misappropriation. In this article, we will discuss some points in relation to misappropriation of assets and funds.
In NSW, according to The Crimes Act 1900, misappropriation of funds is an offence. A person committing this offence can attract a penalty of imprisonment of up to seven years.
Misappropriation and Fraud: Common Types
Occupational fraud or internal fraud is a type of misappropriation wherein employees commit fraud in the workplace. The types of fraud can include corruption and misappropriation of funds (cash, cheque and bank balances). In this section we go over the three types of most commonly occurring fraud of which one is asset misappropriation.
This type of fraud generally involves a third party and an employee stealing from an organisation or company. Given below are some forms of asset misappropriation:
- False expense claims
- Data theft and intellectual property theft
- Deception by employees
- Payroll fraud – diverting payments to other bank accounts
- Embezzlement by altering accounts or creating inaccurate invoices
Financial Statement Fraud
If an employee changes the company’s financials to mislead users it is a type of financial statement fraud. Employees in management can commit financial statement fraud in order to reach certain targets.
Corporate Credit Card Fraud
As the name suggest, this occurs if an employee uses the corporate credit card for their own personal expenses. Businesses should ensure that they have a team to monitor credit card purchase, and to conduct regular checks of purchases.
What is Embezzlement, Data Theft and Intellectual Property?
Embezzlement takes place when an employee obtains property or funds by stealing from their employer. Under the Crimes Act 4AA, Section 157 states that a person who has committed embezzlement can be imprisoned for a term of up to 10 years. An embezzler typically uses the owner funds for personal gains.
Data or intellectual property theft can be devastating for any company or organisation, regardless of the size of the business. For example, an employee may divulge trade secrets of a company to another organisation. This can lead to enormous losses for the other company.
Lawyers for Misappropriation
What can companies do? It is important to be mindful about risk assessment, prevention, detection and investigation to prevent fraud and misappropriation. It is important for companies to identify risks of fraud and areas of fraud.
Here are a few things that a company can do to minimise the risk or impact of fraud:
- Corporate security
- Change of duties or personnel
- Fraud risk management
- Anti-corruption policy
- Internal and external audit, etc
Audit is the process through which a third-party independent personnel or organisation assesses a company’s financial reports and records. These reports are presented as an annual report. This is important to flag any suspicious activity.
Fraud involving information theft and cyber crime may potentially be very harmful for the reputation of the company. This is why companies must especially think of these issues and take necessary precautions.
Importance of Seeking Legal Advice from Lawyers
Commercial lawyers can help with a variety of matters involving fraud and misappropriation. As misappropriation technically falls in the nexus between commercial and criminal law, it is ideal to seek advice from lawyers who have experience in practicing both these types of law. You may also have to approach the police for such matters.
At JB Solicitors, we have a capable team of criminal and commercial lawyers who can assist all clients with their matters. If you are a company facing issues because someone has attempted to misappropriate, it is important to get in touch with lawyers as soon as possible. This is because you have to make sure to cut your losses by acting fast.
We can provide court representation where required. Alternatively we can also help the accused with their legal troubles.
If you have enquires about this subject, do not hesitate to contact our team of lawyers today. Contact us for more information.