After the Supreme Court curtailed federal prosecution of check fraud in the 1980s, Congress passed the Federal Bank Fraud Act to bolster protection for financial institutions. Most commonly, the applicable federal statutes deal with forged and stolen checks, false statements, unauthorized transactions, and embezzlement. But federal law also casts a wide net, penalizing a broad range of fraudulent activities in the banking and financial industries.
Federal Bank Fraud Statute & Penalties
18 U.S. Code § 1344 outlines the federal approach to bank fraud crimes. Under this section, it is unlawful to intentionally:
- Defraud or attempt to defraud against a federal financial institution; or
- Make false statements or representations to a federal financial institution for the purpose of obtaining money, credit, or other things of value.
In this context, there is a statutory definition for the term financial institution that appears in 18 U.S. Code § 20. This term includes federally insured (FDIC) banks and branches, credit unions, depository institutions, holding companies, Federal Reserve banks, members of the Federal Reserve system, foreign bank branches, and mortgage lending organizations.
Any person who violates Section 1344 by committing bank fraud is guilty of a federal crime. If convicted, the maximum sentence includes imprisonment for 30 years and fines up to $1 million. This harsh punishment exists even attempts to commit bank fraud that were ultimately unsuccessful.
When a person commits bank fraud by making a false statement or representation to a financial institution, however, they could face charges under a different federal statute. There are separate federal laws governing false statements in the loan and credit domains, as explained below.
18 U.S.C. 1014: False Statements for Loans or Credit
18 U.S. Code § 1014 establishes the federal laws against making false statements for loans or credit. This section prohibits any person from knowingly issuing a false statement or reports to financial institutions for the purpose of obtaining loans, credit, or other things of value. It is also illegal to willfully overvalue land or other property in these dealings with financial institutions.
Any person who violates Section 1014 by making false statements for loans or credit is guilty of a federal crime. Upon conviction, an offender can face up to 30 years in a federal penitentiary and pay up to $1 million in criminal fines.
Outside of applications for loan and credit, there is another federal statute that addresses fraudulent activity by bank employees. As detailed below, employees who falsify bank records or transactions can face prosecution under several federal statutes.
18 U.S.C. 1005: Fraudulent Bank Records or Transactions
18 U.S. Code § 1005 provides the federal laws against fraudulent bank records or transactions. This section typically applies to officers, directors, agents, and employees of federal financial institutions, if they are acting without the bank’s authority.
Section 1005 violations include falsifying bank records, creating unauthorized checks, issuing improper notes, and conducting similarly fraudulent financial instruments. Accepting or approving a transaction – with knowledge that the transaction is fraudulent – also qualifies as a violation of Section 1005. This section acts as a catch-all of sorts, making it unlawful to attempt fraud by deviating from approved bank practices.
It is a federal crime to violate Section 1005. Upon conviction for a violation of this section, an offender can face a maximum of 30 years in federal prison and up to $1 million in fines.
