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Matthew Radefeld & Dan Juengel
Matthew A. Radefeld and Daniel A. Juengel

Understanding corporate fraud in St. Louis.

On Behalf of | Jan 5, 2022 | White Collar Crimes |

Corporate fraud, also referred to as business fraud, involves unlawful and illusive actions by a company or an employee of a company with the intent of gaining a financial advantage. Business fraud encompasses not only financial fraud but also the theft of data and products. Corporate fraud can be triggered by the need to protect one’s property, avoid loss of income or gain a business advantage.

Let’s take look at the different types of corporate fraud, strategies to mitigate fraud and implications for corporation fraud.

What are the types of corporate fraud?

Corporate fraud exists in different forms and can be detrimental to a company. Here are the three categories of corporate fraud:

  • Asset Misappropriation: This is an offense where a company’s resources are misused by low-level employees for their own financial gains. This can include pocketing cash or not recording a sale. Asset misappropriation can be for cash or non-cash value. An example of non-cash misappropriation is an employee using a company vehicle for personal trips.
  • Financial Statement Fraud: Financial statement fraud occurs when a company’s financial statement is over or understated to make a company’s financial position appear better than it really is. This type of fraud is rare but very costly.
  • Corruption: Contrary to asset misappropriation, corruption is the unlawful provision, receiving or requesting of anything valuable that could impact one’s decision. It is not easy to detect corruption because the offenders mostly bypass financial controls.

Strategies to prevent corporate fraud in your company

While we expect all company employees to value integrity, the reality is that some may involve themselves in fraudulent activities, putting the company at risk. This is why it’s essential to make your employees aware of your company’s fraud risk policy, including the types of fraud and their implications. 

Observing vacation balances might help you expose dishonest employees. While it may appear that employees who never take leave from work are loyal and take their work seriously, it could also be an indication that they have something to hide. 

You can also rotate your employees to different posts within your company. This will expose any fraudulent activity, if any, committed by an employee as their activities are under a “microscope.”

What is the penalty for corporate fraud?

Corporate fraud penalties range from five to 25 years in prison, depending on the type of fraud or the loss incurred by the victims. In addition to imprisonment, if convicted of corporate fraud, an offender could face criminal fines and restitution. The criminal fines can be up to twice the amount of total fraud committed.