Definition & examples of Misappropriation, How to Protect Your Business Against Asset Misappropriation

Can you believe 75% of employees have stolen at least once from their employers? This shocking information highlights the prevalent issue of misappropriation in the workplace.

Misappropriation is the unauthorized use or theft of sensitive data, information, or assets for personal gain or mischievous purposes, costing nearly $50 billion annually as of 2025.

Small theft to large-scale fraud can affect companies, organizations, and businesses of every scale and every sector. Retail and restaurant industries are particularly vulnerable.

Theft of inventory and supplies by employees, and use of unauthorized instruments, although not as frequent as cash theft can cause serious losses for many small businesses. Most of the cases involve non-employee accomplices such as dishonest vendors.

In the dynamic world of modern business, asset misappropriation is a pervasive threat. It can undermine the financial stability and integrity of organizations across various industries.

This article will help you to understand the misappropriation concepts and the offering to your organization on how to deal with and safeguard their valuable assets. Keep reading till the end to deeply understand the key significance.

What is Misappropriation?

Misappropriation is an unauthorized, improper, and unlawful use of assets, money funds, and other property for purposes other than those intended. It involves the situation where the offender adds measures of responsibility.

The measures of responsibility include misconduct by a public authority, a trustee of a trust organization, or an administrator of an expired person’s estate.

In legal terms, misappropriation meaning evolves around the intentional and illegal use of property or funds of another person that one owns for the use of other authorized purposes.

This is a serious concern when committed by an individual with the trustee or any official member.

What are the types of Misappropriation?

Misappropriation can be in various forms which can include:

Misappropriation of Funds

This type of misappropriation involves the illegal use of other people’s money. An assassin may have lawful access to funds and money, using that for personal purposes. Misappropriation of funds example is the unauthorized use that constitutes a crime.

Trade Secret Misappropriation

This type involves when a company’s confidential information or any trade secret is used without permission or authorization. It can cause economic loss, loss of market profits, and can damage the reputation of an organization.

Asset Misappropriation

This is a specific type of insider fraud when someone steals or uses a company’s assets without permission or authorization. This is usually done for its own benefits and advantages. Misappropriation of property is a common example.

Misappropriation of Name and Likeness

This is a type of misappropriation that occurs when someone uses other people’s name or likeness for their benefit. It includes advertisements or commercials, without permission.

What are real-world examples of Misappropriation?

What is an example of misappropriation? To understand the concept of Misappropriation let’s review some real-world examples.

In 2019, a Yale University administrator supplicated guilty to misappropriating $40 million worth of computer equipment. She ordered millions of dollars worth of electronic devices for the university. she then resold it for personal profit.
The case of Bette Midler vs. Ford Motor Company highlights the misappropriation of likeness. Midler successfully sued Ford for using a sound-alike performer in an advertisement. Her evident voice was closely associated with her image.
Johnny Carson won a lawsuit against a portable toilet company. They used the phrase “Here’s Johnny” in their advertisements. This demonstrates the misappropriation of name and likeness.

What are the Impact of Misappropriation?

Misappropriation can have severe consequences and impacts on both the assassin and the victim. The impacts of Misappropriation include

Legal Consequences

Misappropriation of money is a serious offense and it can result in criminal charges. The consequences depend on the jurisdiction and the value of the misappropriated property. It can be divided as a felony, punishable by imprisonment.

Financial Losses

Misappropriation can lead to financial losses for businesses of every scale. According to The Association of Certified Fraud Examiners (ACFE) report, asset misappropriation schemes are the most common type of occupational fraud. There are 86% of the cases that can cause the loss of $100,000 per case.

Reputational Damage

Misappropriation structure can damage a company’s reputation. It leads to a loss of customer trust and potential business opportunities.

Operational Disruption

Misappropriation cases can disrupt normal processing and business operations. It is a time-requiring process. It also requires the resources for investigation and recovery.

What are the Types of Asset Misappropriation

Now you have a better idea of the consequences and impacts of misappropriation. The types of Asset misappropriation are also covered under the umbrella of Misappropriations there’s more to know about it.

Asset misappropriation comes in all shapes and forms, and each of them requires different abilities and precedence.

Data Theft

The most common form of misappropriation of assets is data theft. From March 2021 and February 2022, approximately 42 million records were compromised due to data breaches.

This happens when someone enters a company’s systems without permission and copies sensitive data and information such as customer personal information, financial records, important company data, or secret business plans.

Payroll Schemes

This asset misappropriation occurs when someone in charge of payroll cheats the system. Its purpose is to take extra money for their advantage.

This can include making up fake employees’ records or even adding working hours more than they did.

Embezzlement

When trusted employees make up fake records or use companies’ records to hide what they’re doing that results in committing embezzlement.

This kind of fraud can include anything from fake financial statements to creating false vendor lists for financial gain.

Expense Reimbursement Fraud

Tyco International executives were a few days ago in claiming personal luxuries like a $6,000 shower curtain on the company’s show.

This is known as expense reimbursement fraud. This is a common type of fraud that happens when employees submit fake or modified expenses. They try to pretend that personal expenses are related to work.

Billing Schemes

When employees beyond the expense reimbursement schemes they set up fake companies or work with outsiders of the companies to deal with bills that never existed. This fraud or misappropriation lies in the billing scheme.

This kind of fraud results in the holes of the company when buying a large expenditure to pay. While the employee decides to exploit it for financial gain.

Check Tampering

Check tampering occurs when someone changes the location of a company to deal with illegal money. They change the signatures, change the amount, and change the person who gets paid.

This type of fraud is not common as it cannot done by anyone. It happens only in finance and accounting departments where they handle the checks.

Skimming

It is a common asset misappropriation fraud that happens a lot. It can happen in places that use cash a lot, like small stores.

In this type of fraud, people steal cash before it goes into the company’s accounts. It leaves an impact that those profits outside of accounting records.

Intellectual Property (IP) Theft

Asset misappropriation is not about the theft of money or resources. it affects information and ideas. This theft refers to stealing a company’s ideas or inventions without permission or illegal means.

This includes stealing trade secrets, patent health information, or software resources. It’s often done by employees who have access to important information, especially the person working in the IT department of the company.

Protecting Your Business Against Asset Misappropriation

Given the serious nature of misappropriation, businesses must implement the protective measures. These strategies can safeguard your company’s assets.

1. Implementation of Strong Internal Controls

Setting and maintaining strong internal controls is important in preventing asset misappropriation. This includes

assigning of duties to ensure control of a financial transaction.
Regular resolution of accounts and inventories.
Proper authorization and procedures for financial transactions and asset disposals.

2. Utilization of Asset Tracking Systems

Implementing an asset tracking system can potentially reduce the risk of misappropriation. Modern asset-tracking solutions have features that include

Real-time tracking of asset location and usage
Automated alerts for odd asset movement or following patterns
Detailed audits for all asset-related activities

Maintaining Clear Policies and Procedures

Creating and enforcing clear policies regarding asset use, replacement, and disposal can reduce the chances of asset misappropriation. These policies can include

Definite acceptable use of company assets
Outline procedures for asset replacement and disposal
Establish consequences for policy violations

4. Conducting Regular Audits

Regular audits can help to detect and prevent misappropriation. Your company can consider

Surprise audits to catch potential fraudsters.
External audits to provide an unbiased assessment of your financial records
External audits provide best practices for asset management

5. Protection of Trade Secrets and Confidential Information

To prevent trade secret misappropriation and confidential information your organization can

Use legally enforceable measures such as non-disclosure agreements (NDAs)
Implement security protocols to protect sensitive information
Limited access to trade secrets on a need-to-know basis

6. Employee Education and Training

It is important to Educate your employees and proper training can reduce the risks which include

The importance of asset safeguard
How to identify and report suspicious activities
The legal consequences of misappropriation

7. Leverage Technology

Use the technology to enhance your asset protection which includes

Implementation of cybersecurity measures to protect digital assets
Use data analytics to detect unusual patterns that might indicate misappropriation
employee monitoring software to track asset usage and control sensitive information

Legal Solutions for Misappropriation

Legal solutions	Key function
Civil Lawsuits	Civil lawsuits help to recover damages.It helps in obtaining injunctive relief.
Criminal Prosecution	This allows the state to punish offenders.maintains fair competition and business ethics for criminal misappropriation
Trade Secret Protection Laws	This allows the seizure of property to prevent the dissemination of trade secrets.it offers an additional layer of protection to trade secrets

Conclusion

Misappropriation poses a threat to businesses of all sizes. proper understanding of what constitutes misappropriation and implementing protection measures. companies can reduce their potential risk exposures.

Prevention is always better than cure when it comes to protecting your valuable assets. Staying informed about emerging threats and regularly reviewing and updating is crucial for protection measures.

vigilance and proactive management can safeguard your business against the devastating effects of misappropriation.

FAQs

Misappropriation is Handled In Which Court System?

Misappropriation cases are handled in both state and federal court systems. it depends on the specific circumstances and senarios of the case.

What is Misappropriation?

Misappropriation is the unauthorized, or unlawful use of assets, property, or resources for purposes other than those intended.

What is The Penalty For Misappropriation Of Funds?

Penalties for misappropriation of funds range from $1,000 and up to 1 year in jail for misdemeanors, to $10,000 and up to 30 years in prison depending on the amount misappropriated and jurisdiction.