Bank Fraud Laws
Someone convicted of bank fraud may spend many years behind bars. They also may face collateral consequences upon release, such as obstacles in getting certain jobs. If you are suspected of this crime, you should consult a white collar crime lawyer as soon as possible, rather than waiting until you have been formally charged. You also should avoid discussing your situation with the police and prosecutors. Even if you have done nothing wrong, you may undermine a potential defense by talking to law enforcement on your own.
Elements of Bank Fraud
The main law prohibiting bank fraud is 18 U.S. Code Section 1344, a federal statute. This generally requires a prosecutor to prove that the defendant executed a “scheme or artifice.” The law does not define “scheme” or “artifice,” and these terms tend to be broadly interpreted. In addition, the prosecutor must show that the defendant engaged in this conduct knowingly.
The prosecutor also must show that the defendant had one of two purposes. They must have sought to defraud a financial institution, or to obtain money or other property under the control of the financial institution through false or fraudulent pretenses, representations, or promises.
The U.S. Supreme Court decision of Neder v. U.S. has imposed a further requirement of “materiality” in prosecutions under the federal bank fraud statute. This means that the false statement or other misrepresentation must have been significant enough to affect the actions of the bank.
Example of Bank Fraud
In a loan application to a bank, Phil makes numerous false statements about his income, assets, and liabilities. The bank gives Phil a loan, and he uses the money for purposes other than those stated on the application. Phil eventually defaults on the loan, inflicting a loss on the bank. This is likely bank fraud.
On the other hand, consider a situation in which Phil fills out a loan application that correctly states the financial information. However, it contains an accidental typo involving his address. This is not bank fraud because Phil did not intend to mistype the address. Moreover, it probably did not affect how the bank evaluated the application.
Offenses Related to Bank Fraud
Some other offenses that could be charged in situations similar to those that could support bank fraud charges include:
- Credit card fraud: theft or misuse of credit card information
- Check fraud: writing a bad check with the intent to defraud someone else
- Larceny (or theft): unlawfully taking someone else’s property with the intent to deprive them of it
- Embezzlement: misappropriating money or property entrusted to the defendant
- Extortion: using threats to force someone to hand over something of value
- Forgery: creating or using a fake or falsified legal instrument with a fraudulent intent
A defendant might face multiple charges simultaneously, and they could even face dual prosecution at federal and state levels.
Defenses to Bank Fraud
Someone charged with bank fraud might claim that they did not knowingly engage in this conduct or have the required intent. Perhaps they made an innocent mistake. Or they might argue that the falsehood or misrepresentation was not material. In certain cases, a defendant might claim that they acted under duress. This means that they perpetrated the criminal acts because they faced an imminent threat of serious harm from a third party. Another potential (but rare) defense is entrapment, which means that law enforcement induced the defendant to do something that they would not have been predisposed to do otherwise.
A procedural defense also may overcome a bank fraud charge. If law enforcement seized evidence in a search that violated the Fourth Amendment, for example, the defendant can ask the court to suppress this evidence. The prosecutor might not be able to prove the charge without it.
Penalties for Bank Fraud
The federal statute imposes extremely harsh penalties for bank fraud. A defendant may be fined up to $1 million and spend up to 30 years in prison. This is longer than the maximum term for many other types of federal fraud offenses, such as mail fraud or wire fraud.
Penalties under parallel state laws may be less severe. For example, Florida has a provision that essentially mirrors the federal statute, but this is a second-degree felony that carries up to 15 years in prison. An Illinois crime called “false statement bank fraud” is generally only a Class A misdemeanor, which results in less than one year of imprisonment. Arizona has a broad law prohibiting “fraudulent schemes and artifices,” which could apply to bank fraud. This is a Class 2 felony, carrying a presumptive five-year term with a four-year minimum and a 10-year maximum.
