09 Jul 20

Financial Institution Fraud (FIF)

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Last Updated on: 4th August 2023, 06:38 pm

The term Financial Institution Fraud (FIF) is an umbrella term that encompasses schemes and acts of fraud that target retail banks, check cashers, credit unions, stockbrokers, and federally insured financial institutions. In general, incidents of financial institution fraud tend to compromise the integrity of customer accounts or personally identifiable information, which assists the criminals in committing identity theft and, subsequently, other acts of fraud. Because of the extensive financial damage that this type of fraud can inflict, the FBI and other federal agents and prosecutors have prioritized fighting FIF schemes as a law enforcement strategy.

For this reason, if you’re accused of committing fraud, or you have recently been arrested, your best bet is to get in touch with a financial institution fraud attorney who has experience in federal cases. 

FIF Schemes

Due to the fact that banks, credit unions, and many other financial institutions are federally insured by the Federal Deposit Insurance Corporation (FDIC), there are multiple victims for every instance of fraud.  The victims include the financial institution, the customers or clients of the institution, and the U.S. government. More simply referred to as bank fraud, this federal crime is defined in 18 U.S. Code § 1344.  Pursuant to the law, financial institution fraud takes place when an individual executes a scheme “to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises.”

These kinds of schemes may be carried out either externally or internally.  Several examples of external and internal FIF schemes are:

  1. External FIF schemes: 
    1. stolen or counterfeit checks, 
    2. account holder impersonation, 
    3. misuse or unauthorized use of debit cards (or other access devices), 
    4. credit card scams, and 
    5. email hacking that leads to a financial loss (or theft of personally identifiable information).
  2. Internal FIF schemes 
    1. embezzlement, 
    2. misapplication of funds, 
    3. general ledger fraud, 
    4. account takeover, and 
    5. collusion with external fraudsters

Under many circumstances, teams of individuals and criminal rings carry out financial institution fraud, and quite often, there are multiple individuals implicated in the fraud scheme.

Mortgage Fraud Schemes

Mortgage fraud is a frequent and widespread sub-category of financial institution fraud. This kind of fraud scheme customarily involves a misrepresentation, misstatement, or omission that influences a bank’s decision about a mortgage loan. The fraudsters consciously perpetrate a deception to get the bank to approve a loan, to accept a reduced payoff amount, or agree to modified repayment terms. After the housing market collapse, the FBI and other federal agents have become substantially more diligent and severe in the area of investigating and prosecuting mortgage fraud schemes.

When it comes to mortgage fraud, the schemes fit into two general categories.  These are:

  1. Fraud for profit — In this category, fraudsters work with industry insiders for the purpose of misusing the mortgage lending process to steal cash and equity from homeowners and lenders
  2. Fraud for housing — In this category, fraudsters are homeowners who utilize illegal actions to maintain or gain ownership of a house.

Penalties for Financial Institution Fraud

As with most matters of financial fraud, the penalties are highly dependent upon the circumstances surrounding the offense or the ethical violation.  The criminal code 18 U.S. Code § 1344 states that people who are convicted of bank fraud can be facing fines of up to $1,000,000 and/or incarceration for up to 30 years. In addition, if you are convicted of this crime, you will face the lifelong repercussions of being a convicted felon.