Types of financial misconduct – and how to protect your business against them

Fraud and financial misconduct are significant sources of legal trouble for businesses, and also of fiscal losses and damage to client trust.

Protecting against them, therefore, is of utmost importance and something that every business should know how to do.

This starts with knowing exactly what is going on and what to look out for.

Understanding the terms

‘Money laundering’ and ‘embezzlement’ are terms which are thrown around liberally in the arenas in which most people have heard of financial misconduct – the high-risk, high-reward lives of on-screen traders and businesspeople.

However, many are unaware of what the terms actually mean, including plenty of business owners. Quite simply:

Money laundering is the process of making money made through illegal means look legitimate by placing it within a financial system, hiding its origins and reintroducing it into the economy where it appears legal.
Embezzlement is the crime of taking money, typically by an individual from a business, for personal use, by someone who has legal access to the money but uses it for illicit purposes.

The difference is important because there are similar, but ultimately different, signs to watch out for and steps to take to prevent these crimes from occurring.

Protecting your business

There are two ways to protect your business against financial misconduct – preventing it and identifying it quickly when it has taken place.

Preventing money laundering and embezzlement is your best protection against loss of money and public trust, and can be achieved through:

Internal controls – You should consider regular internal audits by a trusted external provider and separation of duties so that no one person is responsible for an entire transaction
Training – Educate employees on ethical standards and how to report financial misconduct, as well as on the seriousness of such acts
AML policies – Anti-money laundering (AML) procedures and technologies can help to identify potentially fraudulent transactions before they are approved.

You should also make sure that you have the right reporting processes in place to allow employees who have discovered money laundering or embezzlement to report it urgently.

Asset recovery

We can advise you on asset recovery in the case of embezzlement and fraud.

We understand the severity of these situations and the damage they can cause to your business, so we know that it’s vital you seek legal advice as early as possible.

This is particularly true in light of the Economic Crime and Corporate Transparency Act, which created the new offence of failure to prevent fraud for large companies. Your company may need to prove that it had suitable protections in place during the asset recovery process.

Need advice on how to protect your business from financial misconduct? Contact our team today.