Recent high-profile proceedings in Scotland have cast a fresh spotlight on embezzlement: a crime that rarely begins with dramatic intent but instead with ordinary access, unchecked trust, and opportunity.
What follows looks at embezzlement in two ways. First, the legal position in Scotland, including what must be proved and where the line is drawn. It then turns to how these cases play out in practice, and how organisations can avoid finding themselves on the wrong side of it.
The legal framework
In Scots law, embezzlement concerns the dishonest appropriation of property entrusted to an individual and held subject to a duty to account. The defining feature is that initial possession is lawful; the criminality lies in what follows.
The structure of the offence reflects that relationship. The individual must hold property with the consent of another, possess a power of administration coupled with a duty to account, and thereafter apply the property for an unauthorised purpose, often resulting in a failure to account for it.
The critical requirement is dishonesty.
That principle is illustrated in Allenby v HM Advocate 1938 J.C. 55. Funds were applied across a common pool in a manner which was irregular and arguably imprudent. The High Court rejected any suggestion that such conduct automatically amounted to embezzlement. The jury required to be satisfied that the conduct was dishonest; absent that, there could be no conviction. Lord Wark expressed this point directly: there can be no conviction without evidence of dishonest intention.
This statement remains central. It marks the distinction between mismanagement and criminal conduct.
The doctrinal position reflects the same approach. The mental element is a dishonest intention to appropriate property to one’s own use. The focus is on the state of mind at the time of use, rather than the eventual outcome. An intention to repay does not, of itself, prevent liability, where the use of the funds is otherwise dishonest.
The facts of Allenby are instructive in another respect. The conduct was open rather than concealed. The court recognised that even serious departures from proper financial practice do not necessarily evidence dishonesty. The distinction is fact‑sensitive and, in many cases, one for a jury.
Subsequent authority reinforces that approach. In Moore v HM Advocate [2010] HCJAC 26, the use of company funds for speculative purposes required careful scrutiny of intent. The issue was not simply withdrawal, but whether the conduct demonstrated dishonesty in context. Earlier authorities reflect the same principle: misuse of funds is not determinative, but evidential. The issue is whether the conduct can properly be regarded as a dishonest appropriation.
In practical terms, the mixing of funds, failures in accounting, or unauthorised use may all be significant, but none is sufficient in isolation.
It is also necessary to distinguish embezzlement from related offences. Theft concerns taking property without consent, whereas embezzlement concerns misuse of property lawfully held. Fraud, by contrast, depends upon a false pretence used to bring about a practical result. Embezzlement does not require deception; it arises from the abuse of trust.
Practical examples
The distinction is often best understood by reference to example.
At one end of the spectrum are straightforward cases: an employee transferring company funds into their own account for personal expenditure, a treasurer diverting charitable funds, or a professional drawing upon client funds for personal use, even on a temporary basis.
At the other end, the position can be more nuanced. Funds may be moved within an organisation to manage cashflow pressures, payments made from a common fund in a manner inconsistent with strict accounting principles, or money used openly with an expectation that it will later be replaced.
Such circumstances may reflect serious governance failures. Whether they amount to embezzlement will depend on whether the necessary dishonesty can be established.
Sentencing and consequences
Where embezzlement is established, the consequences can be significant, including lengthy custodial sentences. The courts routinely emphasise the breach of trust involved, particularly where the accused held a position of responsibility. Relevant factors include the sums involved, the duration of the conduct, and the level of planning. The impact often extends beyond sentence, including reputational damage, loss of professional standing and potential civil recovery.
Internal controls and safeguarding funds
While the law defines the point at which liability arises, most cases develop long before that stage. They may begin with failures in control and oversight.
Where organisations handle money for their own purposes or on behalf of others, safeguarding those funds is fundamental. Weak controls create not only financial exposure, but reputational and regulatory risk. Internal controls are the practical mechanisms which manage that risk, and their effectiveness depends as much on culture as structure. Oversight which exists only on paper is unlikely to operate in practice, and for which directors and trustees ultimately bear responsibility.
Controls must match the size, complexity, and level of risk within the organisation. Elaborate processes are not necessarily required, with the simplest controls often being the most effective.
A recurring feature in many cases is the concentration of authority. Responsibility for authorising, processing and recording transactions should not rest with one person. A simple yet effective control would be dividing these functions, reducing the risk of undetected error or misconduct.
Basic safeguards in relation to payments include dual authorisation, transaction limits, and restricting payments to approved recipients. Regular reconciliation between internal records and bank accounts is essential, and discrepancies should be investigated rather than explained away.
Expenses incurred by staff present a consistent area of risk. Clear policies, supporting documentation, and independent approval are critical safeguards. As a matter of principle, no individual should approve their own expenditure. Procurement raises similar concerns: spending decisions should not sit with one person without oversight.
Governance and oversight
Responsibility ultimately lies with those in governance roles, and that responsibility requires active engagement. Financial information must be reviewed, understood and, where necessary, challenged. In many cases, the relevant information is available; with difficulties arising due to the absence of scrutiny.
Indicators of weak control environments tend to recur. Unexplained discrepancies, delays in financial reporting, missing documentation, concentration of responsibilities and resistance to oversight should each prompt closer examination. They do not prove wrongdoing, but they are signals that further inquiry is required.
A useful starting point is to consider whether payments are independently authorised, accounts regularly reconciled and reviewed, expenses properly approved, duties appropriately divided, and governance oversight actively exercised. Uncertainty in any of these areas is instructive.
Conclusion
Embezzlement sits at the point where trust is exploited and dishonesty exposed. It does not follow from every failing in financial management, nor from weak systems alone. The authorities are clear: dishonesty is the dividing line.
For practitioners, the challenge lies in recognising when conduct crosses it.
For organisations, the question arises much earlier, and often only with the benefit of hindsight.
These cases rarely begin with clear criminal intent or isolated acts. They tend to develop gradually, within established structures, where access is routine, controls soften and trust goes unchallenged over time.
The law provides the framework for response once that line is crossed. The harder task lies in ensuring it is never reached at all. That depends not on rules alone, but on sustained scrutiny, active governance and a willingness to test assumptions before failures attract attention beyond the organisation itself.
James is a Senior Associate at CT Accountants and Advisors, specialising in the audit of companies and charitable organisations
Cameron is a criminal defence solicitor at Levy & McRae Solicitors, specialising in private, regulatory and white-collar crime