Lapping refers to the act of an employee taking money from one customer’s account and using another customer’s payment to conceal the theft. This process is repeated with multiple customers’ payments in order to hide the illegal and dishonest activity. It can be likened to a game of musical chairs with money.
On the other hand, lapse signifies the termination or disappearance of something due to someone’s failure to fulfil their responsibilities or because of an unexpected event. For instance, if a coupon is not used before its expiration date, it will lapse and become unusable. Similarly, in a will, if a beneficiary mentioned in the will passes away before the person who wrote the will, the intended gift may lapse and be given to someone else instead.
Lapping is a fraudulent activity in which an employee steals money from one customer’s account and uses another customer’s payment to conceal it. This scheme is repeated with multiple customers to avoid detection. For instance, an employee may take $100 from Customer A’s account and use $50 from Customer B’s payment to cover it up. Then, they may take $50 from Customer C’s payment to settle the remaining amount owed to Customer A. Another employee may take $500 from Customer X’s account and use $200 from Customer Y’s payment to cover it up. Then, they may take $300 from Customer Z’s payment to settle the remaining amount owed to Customer X. These examples demonstrate how lapping operates by taking money from one customer’s account and using another customer’s payment to conceal it.
Lapse refers to the loss of a right or privilege due to a failure to exercise it within a specified time limit or because of a contingency that has occurred or not occurred. In the context of wills and estates, it can also refer to the failure of a testamentary gift when the beneficiary dies before the testator dies. For instance, if a person fails to renew their driver’s licence before the expiration date, their licence will lapse, and they will no longer have the privilege to drive legally. Similarly, if a person fails to pay their insurance premium on time, their policy may lapse, and they will no longer have coverage. Additionally, if a person leaves a gift to their friend in their will, but the friend dies before the testator dies, the gift will lapse, and the friend’s heirs will not receive it. These examples illustrate how lapse works by causing the loss of a right or privilege or the failure of a gift to be fulfiled due to non-compliance with certain conditions or deadlines.
Lapping refers to the illegal practice of misappropriating funds by a person entrusted with handling financial transactions. It involves the manipulation of accounting records to cover up the theft.
Yes, lapping is considered a criminal offense as it involves theft and fraudulent activities. It is typically prosecuted under embezzlement or fraud laws.
The penalties for lapping vary depending on the jurisdiction and the amount of money involved. It can range from fines and restitution to imprisonment, with more severe cases resulting in longer prison sentences.
Lapping can be detected through careful monitoring of financial transactions, regular audits, and reconciliations. Suspicious patterns, discrepancies, or unexplained variances in accounting records may indicate the presence of lapping.
Red flags that may indicate lapping include unexplained cash shortages, frequent adjustments or corrections to accounting records, inconsistent or missing documentation, and an employee who is unwilling to take vacations or allow others to review their work.
Yes, employers can implement various preventive measures to avoid lapping. These may include segregating financial duties, implementing strong internal controls, conducting regular audits, promoting a culture of ethics and transparency, and encouraging employees to report any suspicious activities.
In certain circumstances, an employer may be held liable for lapping committed by an employee. This can occur if the employer failed to implement adequate internal controls, ignored warning signs, or knowingly allowed the employee to engage in fraudulent activities.
Lapping can occur in any organisation where financial transactions take place. It is not limited to a specific industry or sector.
Yes, lapping can be committed by multiple individuals within an organisation. In some cases, collusion between employees may occur to facilitate the theft and cover up the fraudulent activities.
If you suspect lapping within your organisation, it is important to report your concerns to the appropriate authorities, such as your supervisor, human resources department, or law enforcement agencies. Whistleblower protections may also be available to safeguard your rights if you choose to report the suspected lapping.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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