The Cunning Embezzlement of a Trusted Employee: Secure the 'Golden Time' Instead of an Emotional Feud

-Legal Column by Attorney Yoon Kyung-won, Daeryun LLC (Limited)

For the CEO who runs a company, trust in employees is the core driving force that leads the organization. Based on this trust, the CEO entrusts work to staff, and in particular delegates considerable financial authority to the employee dedicated to managing funds. However, such trust sometimes returns to the company as irreversible, fatal damage. Looking at the embezzlement cases involving internal employees that have occurred recently, the methods have evolved to be so meticulous and professional that they cannot be compared to the past. A single incident alone can now put the very survival of a company in jeopardy.

Embezzlement in the past mostly consisted of one-dimensional crimes such as simply taking cash out of the company safe or transferring money from the corporate account to one's own personal account. Recent embezzlement, however, often takes the form of so-called 'money laundering,' going through multiple stages to avoid detection. In fact, the suspect in a case I represented did not simply send money to his own account. He illegally misappropriated the personal seal of the representative director that was kept at the company, and secretly opened a borrowed-name (nominee) account under the representative's name. He then first transferred the corporate funds to this nominee account, creating the appearance that the representative had legitimately withdrawn the funds. He then sent this money on to the accounts of his acquaintances or to the accounts of fictitious trading partners (paper companies) with no actual transactions, splitting it into small amounts. In the face of such meticulously planned schemes carried out over a long period, most internal audit systems tend to be rendered useless.

When funds are concealed through such cunning steps as in the case above, even after recognizing the crime, specifying the scale of the damage and proving the charges is a very difficult task. This is because the financial transaction records are complexly intertwined, and the longer the period of the crime, the more thoroughly the evidence is hidden. At this point, the key that determines the success or failure of resolving the case is persistent fund tracing and digital forensics. When uncovering the flow of funds, one must not look only at fragmentary withdrawal records of the corporate account. Only by densely connecting the complex financial transactions—starting from the corporate account, through the misappropriated nominee account, and to the final destinations of the fictitious trading partners and acquaintances' accounts—as a single line can the entire scale of the embezzlement be grasped. In particular, a situation may arise in which the suspect manipulates the accounting books, forges transaction statements, and then deletes unfavorable evidence to conceal the crime. Therefore, the process of recovering hidden and deleted data through swift digital forensics of work PCs and securing undeniable objective evidence must be carried out in parallel.

When you recognize an internal employee's embezzlement, delaying time while overwhelmed by a sense of betrayal, or rashly and emotionally confronting the suspect, becomes a poison that instead provides an excuse for the destruction of evidence. Because recovering embezzled funds is entirely a race against time, securing the golden time is more important than anything else. You must move quickly before the suspect notices and completely converts the funds to cash to hide or squander them. Only by immediately receiving expert assistance the moment a crime is suspected, meticulously collecting evidence, and simultaneously proceeding with swift preservation measures such as provisional seizure and criminal complaints, can you recover even a little more of the company's stolen assets intact. The complacent belief that 'our employee would never do such a thing' is the most fatal weakness in corporate risk management. If an incident has occurred, you must, without hesitation, increase the speed of your legal response and thoroughly protect the company's legitimate rights and property.

Reporter Lee Dong-oh (canon35@mt.co.kr)

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The Cunning Embezzlement of a Trusted Employee: Secure the 'Golden Time' Instead of an Emotional Feud (Go)