Bank Fraud Laws, Charges & Statute of Limitations

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Banks in the US contain trillions of dollars in deposits on any given day. This massive amount of money is tempting for fraudsters.

Bank fraud is a federal crime that occurs when people use illegal means to obtain money or assets from a bank or related financial institution. It also can involve scenarios where a person pretends to be a bank for the purpose of getting a person’s deposits or investments.

There are many ways that bank fraud can occur:

  • Money laundering: Involves taking large amounts of illegal funds and them through a legal business to make money look like it was earned legally. Money laundering is frequent in the illegal drug trade and organized crime.
  • Stolen checks: Criminals open bank accounts under fake identities and get blank checks from an organization, entity, or person. Employees may steal blank checks from their companies. Then, they fill out blank checks and put them in fake bank accounts.
  • Forged checks: After finding a lost check, the person may try to change the check recipient to deposit it in their account or cash it.

Other Crimes Related to Bank Fraud

Other federal crimes are directly related to bank fraud:

Accounting Fraud

This federal crime involves modifying, falsifying, or tampering with information in a company’s accounting records. Criminals may alter the accounting books to make it look like the company is worth more or less than it is. Some companies may use falsified books to make investments. Others may commit accounting fraud to complete loan applications.

A well-known accounting fraud example is Enron. The company was found guilty of falsifying its accounting records to make it look profitable each quarter while it was deep in debt.

Credit Card Fraud

The criminal steals the credit card of a person or does not destroy a credit card found in public. These days, the criminal only needs the credit card number and expiration date to buy items online.

Fortunately, most credit card companies have account monitoring systems that warn clients where there is abnormal spending activity on a card.

Also, some criminals try to get funds illegally by pretending to be a bank client. After getting basic information about the person, the perpetrator might use the information to sign up for credit cards, open bank accounts, and make financial transactions in that person’s name.

Internet Fraud

A digital form of bank fraud is Internet fraud, also known as phishing. Phishing scams send phone emails to people who seem to be from that person’s bank. The email often tells the recipient to go to a fake website to enter their personal details and data. These websites are extremely deceptive in some cases, often looking just like the website for that bank.

Another popular Internet-based bank fraud scam is creating a virus that searches a user’s computer to find personal data stored on the hard drive.

Bank Fraud Laws

Bank fraud is usually considered a federal crime because banks are insured by the Federal Deposit Insurance Corporation. This federally-funded program protects bank deposits.

The FDIC Act defines several types of bank fraud and related fraud in its regulations, under 18 USC Code:

  • Subsection 1344 Bank Fraud: Whoever knowingly executes or attempts to execute a scheme to defraud a financial institution to obtain money, funds, credits, assets, securities owned by or under the control of financial institutions will be fined up to $1 million and face up to 30 years in prison.
  • Subsection 1343 Fraud By Wire, Radio, Or Television: Whoever executes or attempts to execute a scheme to obtain money or property by false or fraudulent pretenses transmitted by wire, radio or TV communication, can be fined million and imprisoned for up to 20 years.
  • Subsection 1341 Frauds and Swindles: Whoever executes or attempts to execute a scam to sell, dispose of, loan, alter, exchange give away, supply or procure for illegal use of any counterfeit or fake coin, obligation, security, or other article, will be fined and imprisoned for up to 20 years.

It is key to note that 18 US Code 1344 applies to both insiders and outsiders. Both customers and bank employees can be guilty of bank fraud. Or they can be charged with developing a conspiracy together to commit bank fraud.

Also, you may be convicted of bank fraud even if your loan application was turned down or if the person you dealt with at the financial institution knew about your fraud. If you are charged with bank fraud conspiracy, you can be convicted even if you did not do the crime, but aided a person who did.

Bank fraud charges often are accompanied by charges for money laundering, income tax evasion, identity theft, and wire fraud.

Bank Fraud Defenses

To be convicted of bank fraud, the federal prosecutor must show beyond a reasonable doubt that you committed the crime.

For example, if you allegedly made false representations or deposited a check with a forged signature, but did not know the information was incorrect, you cannot be convicted of bank fraud. It must be proven that you knowingly committed the crime.

Bank Fraud Punishments

18 US Code 1344 states that a person convicted of bank fraud at the federal level can be fined up to $1 million and be imprisoned for up to 30 years.

The individual also can face fines and penalties for bank fraud at the state level.

Sentencing Guidelines

The US Sentencing Guidelines state that you can receive up to 30 years in prison and/or a fine of up to $1 million for bank fraud.

However, according to the guidelines, judges must make a calculation of your offense level and criminal history to determine what your sentence will be, up to the maximum mentioned above.

Other factors that are taken into consideration for a bank fraud sentence under the guidelines include:

  • Nature and circumstances of the bank fraud and the characteristics and history of the defendant.
  • The need for the sentence, considering the seriousness of the crime, and providing a just punishment and a deterrence to criminal behavior.
  • The types of sentence and sentencing range that have been established for bank fraud.

Statute of Limitations

According to 18 USC 1344, the statute of limitations for bank fraud at the federal level is 10 years after the offense occurs.

References