What You Should Know About Federal Bank Fraud Laws

How to Defend Your Federal Bank Fraud Case

U.S. Attorneys Offices across the country prosecute thousands of Federal Bank Fraud cases each year. Specifically, the bank fraud statute is located in Title 18 of the United States Code Section 1344.

Elements of Federal Bank Fraud Case

The following are the elements of bank fraud:

1. Knowingly executing or attempting to execute a scheme or artifice to
2. Defraud a financial institution, OR
3. Obtaining money or other property owned or under the control of a financial institution.

What is a the Definition of a Financial Institution?

A financial institution is “an insured depository institution” that term is used in the Federal Deposit Insurance Act.

Expanded Definiton

Furthermore, in May 2009, Section 20 of United States Code Title 18, was expanded. The definition now includes “a mortgage lending business or any person or entity that makes in whole or in part a federally related mortgage loan.”

Therefore, Bank fraud applies to all FDIC-insured institutions. In addition, it applies to any mortgage lending business, person or entity that makes at least a partial federally-related mortgage loan. 

Bank Fraud Penalties

Federal Bank Fraud has a maximum fine of $1,000,000 and/or jail time of up to 30 years.

Bank Fraud Protects the Federal Government

The Courts have held that Bank Fraud Laws were passed to protect the federal government’s interest as the insurer of financial institutions. Subsequently, the intent wasn’t to protect consumers who got defrauded by con-artists and fraudsters. The mere use of the bank’s traditional customer services does not, by itself, transform misconduct into Bank Fraud. Because the Bank Fraud Statute does not “federalize funds” that are only “tangentially related to the banking system.” 

Examples of Bank Fraud Prosecutions:

Many different types of check fraud can be prosecuted under the bank fraud statute. For example, below are some common examples of Bank Fraud Prosecutions:

1. Check Fraud and Check Kiting

The term “Check Fraud,” covers many financial schemes. For example:

  1. Intentionally writing a bad check;
  2. Embezzling money out another individual’s bank account;
  3. Forging checks and then cashing them;
  4. Check Kiting
What is Check Kiting?

Check kiting is a type of check fraud. Sometimes, it is referred to as “taking advantage of the float.” That is the difference in time between the deposit of the check and the bank’s authorization to move the money into the payee’s account.

Specifically, this involves writing a check from the first account to the second account without having enough funds. Then, quickly writing a check from the second account and depositing it into the first account. And then, doing it several times. This practice creates inflated account balances. Ultimately, this results in a loss to the bank. 

2. Credit Card Fraud and Identity Theft 

Credit Card Fraud and Identity Theft involve opening up fraudulent credit cards. Sometimes, these cards are opened in the names of fictitious individuals. Other times, they involve the use of real people’s personal identifying information (called “PII”) without their consent. Ultimately, it is the bank that will bear the loss of as a result of this credit card scheme.

Frequently, Federal Bank Fraud charges involving stolen PII are accompanied by the federal Aggravated Identity Theft charges. Each charge is punishable by 2 years imprisonment. However, in cases involving terrorism, the punishment is 5 years. Aggravated Identity Theft charges run consecutive to the sentence on bank fraud charges. Hence, the sentenced run after one another, and not at the same time.

3. Mortgage or Real Estate Fraud 

Mortgage Fraud and Real Estate Fraud are deserving of their own section. There are many real estate and mortgage schemes that can be prosecuted under the bank fraud provision, since most, if not all mortgages obtained through an FDIC bank or somehow involve an entity associated with mortgages from federal funding.  Common mortgage and real estate fraud schemes involve: (1) identity theft; (2) income and asset falsification to obtain a mortgage; (3) appraisal fraud, (4) home equity line of credit (HELOC) fraud; (5) equity skimming; (6) air loans; (7) foreclosure rescue; and (8) loan modification schemes. All of these mortgage or real estate fraud schemes can be prosecuted as both wire fraud and bank fraud. 

4. Account Take Over Scheme

Account take over scheme involves an individual taking over an unsuspecting victim’s bank account and withdrawing money out. For example, individuals obtain account account holder’s bank information through:

  1. Sending a phishing email and obtaining the account holder’s contact information; OR
  2. Purchasing of the individual’s personal identifiable information (PII)

Afterwards, they contact the bank and request a duplicate card or set up a wire transfer to take money out of the account.

Defending Bank Fraud Cases 

These are some defenses that can be raised in a Federal Bank Fraud prosecution: 

(1) Lack of “Knowing” Intent

Under the bank fraud statute, the Government must prove beyond a reasonable doubt that the individual “knowingly” committed bank fraud. A successful defense may be that the conduct was not “knowing.” For example, maybe the conduct was erroneous.

If the Government cannot establish just one element of Bank Fraud, you cannot be convicted of the charge. 

(2) Mitigation of Loss Amount 

The greatest factor in a bank fraud case is the amount of money involved. Specifically, under Federal Sentencing Guidelines, this is called the “loss amount.” Furthermore, the loss amount is the “greater of actual loss or intended loss” from the criminal scheme.

Under federal sentencing guidelines, Bank Fraud has a very low base offense level. Specifically, it is either a 6 or a 7 (7 if the maximum on the charge is more than 20 years). However, the loss amount can greatly increase the offense level. For example, an actual or intended loss of over 550 million dollars results in a 30-level increase of the base offense level. Thus, the total offense conduct is 36, instead of 7. Thus, lowering the loss amount can a difference between a phenomenal resolution of the case and a bad one. 

Have an Experienced Federal Bank Fraud Attorney By Your Side

It is important to retain an experienced federal bank fraud attorney to represent you. The stakes in a bank fraud case are very high, as the charge is punishable by up to 30 years in prison. It is essential to have an attorney that understands the alleged bank fraud scheme and works with you to develop a defense strategy. Call us at 212-729-9494 or contact us today for your free initial consultation to find out if we are the right firm for you.