Corporate fraud often begins with the fact that many officers, managers, insiders, executives, and others may be given access to bank accounts and financial tools of a particular business. They are expected to use the assets for the good of the business and in an intended manner.
When this fiduciary authority is misused, funds might be routed to outside accounts or used for personal gain instead of being used for the business as intended. During these transfers, it’s possible that the transaction at issue will initially appear routine.
What happens when an authorized agent doesn’t comply with fiduciary duties?
When a person entrusted with any financial components of a company, it’s considered insider embezzlement if that person initiates unauthorized transactions that benefit themselves. This can include activities like forged checks, altered invoices, false vendor payments or other account changes that benefit someone other than the company.
The becomes more complex when a financial institution or third party allows suspicious transactions to process even though there are signs present that the person is acting outside of proper authority. These situations are addressed under the Uniform Fiduciary Act.
What is the Uniform Fiduciaries Act?
The Uniform Fiduciaries Act addresses situations when a fiduciary handles money or property while dealing with financial institutions or other parties. The law recognizes that businesses must be able to count on authorized agents. It also considers if the outside party had any knowledge of wrongdoing or if it acted in bad faith.
The distinction of the actions of the outside party are important because they can directly impact corporate fund recovery. Banks aren’t automatically liable in every instance involving insider embezzlement. Instead, an outside party might be liable if there is evidence suggesting that the outside party ignored signs that the fiduciary was breaching a duty or misusing their authority.
Ultimately, businesses may attempt to recover embezzled money directly from an offending fiduciary, but that’s not always possible. Claims against an outside party can potentially help a company to recover financial damages, but that’s only possible when liability of the outside party can be proven. Because these claims are complex, working with a legal professional familiar with these cases may be beneficial.