Accidental Embezzlement and White Collar Crimes That Could Break Your Business

As an entrepreneur, business owner, or someone looking to break into this space, you most likely already have a grand vision for what the future holds for your ideas and finances. However, before you get too ahead of yourself, it’s best to take a step back and ensure that your business is keeping up with safe and healthy financial practices, including abiding by all tax laws and federal financial regulations that your business falls under.

Committing white collar crime by mistake

Not only is this step important to ensuring that your entrepreneurial pursuits have a safe future, but it’s also a good idea to learn about what financial mistakes newbie entrepreneurs often make so that you can avoid falling into these traps before it is too late.

We’ve listed a few below to give you an overview of simple and easy ways to protect yourself in the event you are accused of a financial crime such as embezzlement, tax fraud, or money laundering.

Accidental Embezzlement? How Does That Happen?

Despite not being a valid excuse when you are charged with other types of crimes, ignorance of financial laws can save you, but only if you are very lucky.

Many business owners typically begin separate bank and credit accounts to keep track of business profits and expenditures in a way that is distanced from their own personal finances. However, should you use those business funds for your own personal expenses (even by accident) and then attempt to write those off on your taxes, you can be accused and charged with tax fraud and embezzlement. Typically, full knowledge of what you are doing is required for an embezzlement charge, but ignorance of the law typically fails as an excuse for stealing company funds.

Trade Fraud and Tax Fraud

Mishandling corporate funds can sometimes be far too simple, with the onus of the crime falling upon you when someone else has made a grave error.

In the case of Dan Bubalo, for instance, a simple mistake by his attorney turned into a $4.5 million lawsuit from the SEC. Because his attorney forgot to register several of his trades, Mr. Bubalo was charged with several different types of financial security crimes, including securities fraud, wire fraud, and mail fraud.

Despite his ignorance of the law, Mr. Bubalo did not use that as a defense–instead, the former CEO claimed responsibility for the crime and was offered a plea bargain by the FBI. Even though his lawyer had practiced securities law for over 30 years, this small mistake led to a big loss for Bubalo. It’s always smart to keep an attorney on speed dial should you run into any legal issues, but it also doesn’t hurt as a CEO to keep yourself informed and ensure that no illegal activity is taking place in your company under your watch.

Another common type of “accidental” crime that small business owners may make relate to tax laws. If you work from home, even with a home office space, you may assume that your mortgage, as payment for said office space, should be deductible from your business’ taxes. However, don’t attempt that deduction so quickly–only part of your home qualifies for the “home office” deduction, and attempting to claim your entire mortgage as a business expense can be considered tax fraud.

Managing small business finances

What Can Be Done To Prevent This?

Despite the myriad ways that fraud and embezzlement can be accidentally committed, most financial crimes are committed by parties with full knowledge of the illegality and consequences that may stem from this act. It never hurts to be protective of your business and its financial health, however, and educating yourself on tax laws and financial regulations is an easy way to avoid falling into this trap that could end your business before it has a chance to get off the ground.

If you ever have any doubts about whether you’ve committed a financial crime, it’s time to speak to a criminal defense attorney who may be able to help you fight potential charges or correct your behavior before it spirals out of control. Protect yourself and your business from falling prey to criminal charges in the present and future and your path to success will be much smoother and easier to walk.

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