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Prepared by: Yaakov 'Jake' Goldstein, CPA
A basic awarenss of the mechanisms used to commit white collar crime can go a long way in preventing them and spotting them if they ever occur.
The following is a list of common methods of fraud and embezzlement grouped by the financial process of a typical back office. The quotes below each method are copied from news articles of actual cases.
a. Depositing check donations into a fake bank account and issuing fake tax receipts to the donor.
“She fraudulently used the congregation’s checks to pay personal expenses, endorsed and converted checks that were meant for the congregation and drew the congregation’s checks and diverted funds to her own personal accounts.”
b. Colluding with vendors on fraudulent schemes
“Donors regularly made large charitable contributions to be written off their taxes. The money was secretly funneled 90 percent of it back to the donor, keeping 10 percent for himself. One donor got his donation returned in the form of $1 million in gold, prosecutors said.”
a. Colluding with vendors to overcharge and get kickbacks or “finders fees”.
“The insurance company would inflate the insurance rates by hundreds of thousands of dollars, which he and his co-conspirators would then keep for themselves.”
b. Submitting fake invoices for phony services or goods.
“The employee had access to critical financial systems, and she created fake invoices in the names of legitimate groups. She approved the invoices for payment, and when the checks were ready, she cashed them herself.”
a. Writing checks from the organization to oneself or paying directly for personal items.
“She forged signatures of nonprofit executives on checks, which she made payable to herself.”
b. Using the organization’s credit card or debit card for personal expenses.
“He would use the organization’s credit cards to make personal purchases, falsely characterizing their purchases as legitimate expenses. At the end of the year, he would allocate his personal expenses to the departments that had not exceeded their budgets.”
a. Paying unapproved salaries.
“The director raised her salary without receiving board approval.”
b. Payroll fraud
“The school paid its employees in a manner that grossly underrepresented their employees’ “on the books” income.”
a. Online banking transfers from the organization’s bank account to a personal bank account.
“$500,000 had been wired from the shul’s bank account to the director’s personal account.”
b. Electronic payments from the organization’s payment processing portal to a personal account.
“He allegedly used the school’s PayPal and Stripe accounts to transfer school funds into his own personal PayPal account.”
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