Payment defalcation is a form of what?

• A. Illegal gratuities scheme
• B. Skimming scheme
• C. Fraudulent financial statement scheme
• D. Embezzlement

Answer: (D)

Payment defalcation involves misappropriating funds that someone has been entrusted to handle, which is a classic form of embezzlement. When an employee or agent takes money—such as cash receipts or checks—without proper authorization and uses it for personal purposes, they are stealing from the organization while in a position of trust. This differs from simply accepting a gratuity in exchange for influence, or from skimming cash before it’s recorded, or from manipulating financial statements. Embezzlement captures the idea that the funds were legitimately within the person’s control and were covertly diverted for personal use.