A person is said to be in ________ act, when the business which he transacts, or the money or property which he handles, is not for his own benefit, but for another person:

Fiduciary capacity exists when one party, the fiduciary, possesses and controls money, property, or decision-making authority for the benefit of another. The essence of the relationship is the obligation to act solely in the beneficiary’s interest; the assets or business handled are therefore not for the fiduciary’s personal gain. ACFE identifies “fiduciary capacity” as the prerequisite element in frauds such as embezzlement and conversion, because the fiduciary’s control originates from a position of trust rather than ownership.

B. Embezzlement – Describes the fraudulent appropriation of property already in the perpetrator’s lawful possession; it is a crime, not the capacity itself.
C. Conversion – Refers to the wrongful exercise of dominion over another’s property; again, it is an act, not the relational capacity.
D. None of the above – Option A correctly fits the definition, so “none” is false.

1. ACFE Fraud Examiners Manual

2022 ed.

Financial Transactions & Fraud Schemes

Ch. 1

§1.3 “Fiduciary Capacity

” p. 1.201-1.202.

2. Frankel

T. (2005) “Fiduciary Law

” 71 Fordham L. Rev. 1241

1244-1246 (defines fiduciary holding of property for another). https://doi.org/10.2139/ssrn.620922

3. United States v. Sayklay

542 F.2d 942

944 (5th Cir. 1976) (legal definition of fiduciary capacity distinguishing it from embezzlement).