Misappropriation of funds refers to the criminal offence or unauthorised use of funds that were entrusted to an individual or organisation. A person committing this criminal act takes funds they have access to and uses them for personal gain, instead of for their intended purpose. Misappropriation of funds can take many forms, such as:
- Embezzlement – This occurs when someone who has access to funds or assets uses them for personal gain. Embezzlement can take many forms such as altering financial records, diverting financial funds, or creating false expense claims.
- Financial fraud – This occurs when an individual or organisation deceives others to gain financial advantage. Examples of financial fraud include Ponzi schemes, insider trading, false accounting, credit card fraud, payroll fraud, and skimming. Skimming occurs when an employee steals cash before it enters into the accounting system of the company they are working for.
- Theft – This is the act of taking someone else’s property to permanently deprive the victim. Theft crime can take many forms, including stealing physical items such as money, jewellery, or company equipment. Non-physical items can also be stolen such as intellectual property or trade secrets (data theft). Click here to read the difference between larceny and theft.
Read this article to know more about the misappropriation of funds in Australia.
Which Court Hears Misappropriation of Funds Matters?
In Australia, the court that hears misappropriation of funds matters can vary depending on the jurisdiction and the severity of the offence. Generally, minor offences will be heard in a Magistrates’ Court, while more serious offences will be heard in a District Court or Supreme Court. In New South Wales:
- The Local Court NSW: The Local Court hears summary offences (less serious offences) under the Crimes Act 1900 (NSW); and
- The District Court NSW: The District Court hears indictable offences (more serious offences) under the Crimes Act 1900 (NSW).
What if the misappropriation of funds matters involves a breach of the Corporations Act 2001? If this is the case, it may be heard in the Federal Court of Australia or the Supreme Court of the relevant state or territory. It’s highly important to seek legal advice if misappropriation of funds matters escalate to court.
What Must the Prosecution Prove?
To prove fraudulent misappropriation of funds in court, the police must establish the following matters beyond a reasonable doubt:
- That the accused collected or received the money or valuable security mentioned in the charges.
- That the accused did so with the understanding that they should deliver, account for, or pay the whole or a part of the money or valuable security or its proceeds after making authorised deductions or payments to a named person.
- That the accused fraudulently misappropriated the money or failing to account for it in violation of the terms upon which they received or collected it.
Penalties
The severity of the offence and the quantity of money involved determine the penalty for the misappropriation of funds in Australia. Theft of money is a serious offence that carries fines or maybe prison time as punishment. The maximum penalty for a violation of Section 1041G of the Corporations Act committed before March 13, 2019, is:
- 10 years in prison; and/or
- A fine of up to $810,000 or three times the total value of the benefits the offender received
Case Study
The case study (R v Hopkins [2021]) involves Ross Hopkins, a financial advisor. He was charged with 15 counts for engaging in dishonest conduct in relation to the provision of financial services to 13 clients. Hopkins executed 167 unauthorised transfers of funds from his clients’ accounts and misappropriated funds totalling $2,938,750 for personal expenses.
The Commonwealth Director of Public Prosecutions (CDPP) sought reparation orders on behalf of the victims. The court granted the victims for the charged fraud amounts and professional fees incurred in seeking to recover the misappropriated funds.
Hopkins was sentenced to a maximum of six years imprisonment with a non-parole period of four years. This case is notable as it was the first prosecution of offences under s1041G of the Corporations Act. This sentence also demonstrates that white-collar crime is being taken seriously.
How To Handle Misappropriation of Funds?
Misappropriation of funds is a serious crime that should be handled in a responsible and timely manner. If you believe that funds have been misappropriated, there are several steps you can take:
- Contact the appropriate authorities: If people suspect that someone has misappropriated funds, they should report the matter to the relevant authorities. This may include the police, the Australian Securities and Investments Commission (ASIC), or a government regulator.
- Conduct an internal investigation: People who are in charge of overseeing misappropriated funds should conduct an internal investigation. This can help determine the scope and extent of the misappropriation.
- Consider various options: Depending on the nature and extent of the misappropriation, individuals may have several options available to them These may include seeking restitution or compensation, initiating legal proceedings, or pursuing criminal charges.
- Implement preventative measures: To prevent future incidents of misappropriation, individuals should implement appropriate controls and processes to safeguard funds. This ensures accountability for whoever is responsible for asset misappropriation. Such preventive measures may include regular audits, clear policies and procedures, and training and education for staff and stakeholders.
- Seek legal advice: Lawyers are the most qualified people if a client wants legal representation on misappropriation of funds matters. These legal professionals can aid in the whole court process and may also conduct negotiations.
Our Commercial and Criminal Lawyers
Misappropriation of funds is a serious legal matter that can lead to both civil and criminal consequences. It is a breach of trust that can harm individuals, organisations, and even the economy as a whole. Misappropriation of funds can result in significant financial losses, legal liabilities, and damage to reputation.
Our commercial and criminal lawyers at JB Solicitors can aid in legal matters like misappropriation of funds. We can offer legal advice on how to prevent such incidents and assist in internal investigations to identify potential misappropriation of funds. Our team can also:
- Provide legal representation to the accused in criminal proceedings
- Aid in the investigation procedure in order to prepare a comprehensive defence; and
- Negotiate with prosecutors
Contact us today for all of your commercial and criminal law matters.
