Any licensed CPA caught perpetrating a lapping scheme should have his or her license revoked immediately and permanently — not for committing an act discreditable to the profession, but for being a giant dumbass. There so many types of fraud that are way easier than lapping. No. Wait. Every type of fraud is way easier than lapping.
If you forgot, here's how a lapping scheme works:
1. Customer A makes a payment on her account, but instead of applying it to her account, you steal it.
2. Customer B makes a payment on his account, but you apply it to Customer A's account so that Customer A doesn't find out you stole her payment.
3. Customer C makes a payment on her account, but you apply it to Customer B's account so that Customer B doesn't find out you applied his payment to Customer A's account.
4. This goes on forever. You are eternally damned to applying payments to the wrong customer's account. Like if Sisyphus was an AR clerk.
I'd like to believe that people who find themselves in lapping schemes are stupid fucks with hearts of gold. They have financial pressure, like they need to put food on the table, or they incur a huge unexpected meth addiction. They see an opportunity to use some of the company's funds — a cash payment on a customer's account — as a stopgap to buy the aforementioned food and/or meth. They sincerely and wholeheartedly plan on paying the money back as soon as the rebate check from the 65" Toshiba flat screen comes in the mail. But once the rebate check comes another emergency comes up, like a weekend trip to Vegas. Since the rebate check will only cover half the plane ticket, they need to intercept another payment to afford airfare, and yet another to have some gamblin' money. But it's okay because they've got a foolproof system on the slots, whereby they should be able win enough money to pay back the misappropriated funds AND the payday loan from Check City. Thus begins the endless cycle of good intentions, recurring emergencies, and stupid fuckery.
But if you start a lapping scheme, the lapping scheme will make you its bitch. According to one fraud expert:
Employees who become involved in lapping schemes must devote a lot of time and energy to concealing their fraud … Signs of a lapping fraudster might include working long hours and refusals to take vacations.
Which is why most people get into fraud: they love long hours and think vacations are for pansies. Perpetuating a lapping scheme is like having a second job that you wouldn't need if you'd just gotten a second job instead of starting a lapping scheme.
Because lapping is so stupid, I started to think that, although it's theoretically possible, it isn't a thing that actually happens in real life — like lawn aerator shoes, diphallia, or job satisfaction at the Big 4. But then this story breaks just last month in Pennsylvania:
Lehigh County authorities said Nancy Tonkin, a 30-year-township employee who spent most of her time as the utilities supervisor, used a sophisticated "lapping" scheme to conceal the theft of $854,497 from the township from 1999 to June 2012.
Holy hell! This lady kept a lapping scheme going for 13 years! The median duration of skimming schemes (lapping is a subset of skimming schemes) is 24 months according to the ACFE's 2012 Report to the Nations. Thirteen years is unbelievable! If she were one of my first-degree connections on LinkedIn and listed lapping under "Skills & Expertise," I would totally endorse her for that.
She also belongs in the Lapping Hall of Fame because the median loss for asset misappropriation in 2012 was $120,000. She kicked that statistic's ass. She stole over $850,000, averaging $65,000+ per year. That's $15,000 more than the median household income in Pennsylvania which, granted, is pulled down a bit because of the Amish.
The trickiest part of a lapping scheme is the exit strategy, and Mrs. Tonkin had the perfect denouement. She and her ex-cop husband (who was also arraigned in connection with the lapping scheme) were 66- and 69-years-old, respectively. Some would say they got caught; the Tonkins would say they initiated their retirement plan. They lived it up for 13 years, and now their first five to ten golden years will be spent in an all-expense-paid minimum security retirement prison. Well played, Tonkinses.
In conclusion, lapping is like dancing, mostly because I want to refer to people who do it as "lapping dancers."