Federal Bank Fraud Charges Under 18 USC 1344: When Banks Fight Back

Federal Bank Fraud Charges Under 18 USC 1344: When Banks Fight Back

So your probably facing federal bank fraud charges and your ABSOLUTELY SHOCKED because you thought it was just a loan application or business banking issue. Maybe you inflated income on loan application. Maybe there’s allegations you deposited fraudulent checks. Or maybe prosecutors claim you obtained PPP loan through misrepresentations. Look, we get it. Your COMPLETELY OVERWHELMED by these charges. And you should be TERRIFIED! Because bank fraud under 18 USC 1344 carries 30 YEARS in federal prison and $1 MILLION fine – more than wire fraud, mail fraud, or most other fraud offenses!

What Is Federal Bank Fraud Under 18 USC 1344?

Let me explain why bank fraud is prosecutorial favorite. Section 1344 enacted in 1984 to combat frauds against federally-insured financial institutions – gives federal government jurisdiction over ANY fraud involving FDIC-insured banks!

The statute has TWO alternative prongs – prosecutor can charge either or both! Prong One: scheme to defraud financial institution! Prong Two: obtaining money or property of financial institution by false pretenses! Each carries same 30-year maximum!

Here’s what’s really scary – “financial institution” covers over 4,000 FDIC-insured banks, credit unions, savings and loans! Any fraud touching these institutions? Federal crime! Deposited bad check at your local bank? Federal bank fraud! Lied on car loan application at credit union? Federal crime!

Don’t need to prove bank actually lost money! Attempted bank fraud is same crime as completed fraud! Scheme detected before bank loses anything? Still 30 years! We’ve seen prosecutions where banks were fully repaid but fraud charge stands!

What Are the Elements of Bank Fraud?

Four elements prosecutors must prove but all broadly interpreted!

Must prove defendant KNOWINGLY executed or attempted to execute scheme! Knowledge requirement means aware of scheme and participation was voluntary! But prosecutors use circumstantial evidence – patterns of conduct, false documents, inconsistent statements!

Must prove scheme to defraud financial institution OR to obtain property by false pretenses! First prong targets defrauding bank itself! Second prong includes obtaining victim’s money through bank! Either way satisfies statute – prosecutors charge both prongs for same conduct!

Must prove statements or omissions were MATERIAL! Material means capable of influencing bank’s decision! Lying about income on loan application? Material because affects lending decision! Overstating collateral value? Material! But opinions and puffery may not be material!

Must prove financial institution was FDIC-insured! This gives federal jurisdiction! But nearly ALL banks, credit unions, and savings institutions are FDIC-insured! Prosecutors easily prove this element through FDIC records!

Intent to defraud required but proven circumstantially! Don’t need direct evidence defendant intended to cheat bank! Jury can infer from false statements, concealment, pattern of conduct! Good faith belief destroys intent element!

What Are Common Bank Fraud Scenarios?

Prosecutions cover WIDE range of conduct!

Loan fraud is MOST common! False statements on mortgage applications, business loan applications, car loans, student loans! Overstating income, employment, assets, or collateral value! Using nominee borrowers or straw buyers! Each false statement on application is separate bank fraud count!

Check fraud prosecutions are EXPLODING! Check kiting schemes using float between banks! Depositing counterfeit or altered checks! Forging signatures! Creating fake checks using desktop publishing! We’ve seen prosecutions for mobile depositing same check multiple times!

ATM and debit card fraud! Card skimming devices at ATMs, cloning cards, using stolen card numbers! Each unauthorized withdrawal is separate bank fraud count! Recent case: defendant got 10 years for depositing forged checks through ATM!

PPP and EIDL fraud during COVID-19! False claims about number of employees, payroll expenses, business existence! Government prosecuting thousands of PPP fraud cases – even small false statements being charged! $20,000 PPP loan with false application? 30-year felony!

Embezzlement by bank employees! Tellers stealing from accounts, loan officers creating fake loans, executives misappropriating funds! FDIC can bring civil enforcement actions AND DOJ prosecutes criminally! Double exposure!

What’s the Difference Between Bank Fraud and Wire Fraud?

Both often charged together but have DIFFERENT elements!

Bank fraud requires scheme affect FDIC-insured financial institution! Wire fraud requires use of interstate wire communications! Prosecutors charge BOTH for same conduct – wire fraud for electronic communications PLUS bank fraud for involvement of bank!

Bank fraud has 30-year maximum! Wire fraud is 20 years (30 if affects financial institution)! Bank fraud carries higher penalty because Congress wanted to protect banking system!

Bank fraud doesn’t require interstate commerce! Just involvement of FDIC-insured institution! Wire fraud requires interstate communication! This means purely intrastate frauds can be bank fraud but not wire fraud!

Example: submit false loan application in person at local bank branch! No interstate wires used but bank is FDIC-insured! That’s bank fraud but arguably not wire fraud! But if you submitted application online? Both bank fraud AND wire fraud!

Prosecutors pile on charges! One fraudulent loan application submitted online? Bank fraud for defrauding institution, wire fraud for using internet, false statements for lying to federally-insured bank! Three felonies for one application!

What Are Penalties and Sentencing?

Penalties are CRUSHING and among highest for fraud offenses!

Maximum 30 years prison and $1 million fine – higher than wire fraud or mail fraud! Congress set higher penalty because bank frauds threaten financial system stability! Multiple counts create life imprisonment exposure!

Sentencing guidelines use §2B1.1 fraud guideline with base offense level 7! But loss amount enhancements add levels exponentially! Loss under $6,500 adds nothing but loss over $550 million adds 30 levels! Mortgage fraud causing $5 million loss? Guideline range of 10+ years!

More than 10 victims adds 2 levels! Financial institution is victim? Already established! But sophisticated means adds 2 levels! Using false documents, shell companies, fake IDs – all sophisticated means!

Leadership role adds 2-4 levels! If you recruited others into fraud scheme, enhancement applies! Organizer of mortgage fraud ring? Add 4 levels! Minor role REDUCES 2 levels but rarely granted!

Restitution is MANDATORY! Must repay full loss to financial institutions! Banks aggressively pursue restitution – they want money back PLUS they got federal prosecution! We’ve seen million-dollar restitution orders!

FDIC can pursue CIVIL penalties too! Separate from criminal case, FDIC brings enforcement actions for restitution, civil penalties, and industry bans! Lifetime ban from banking industry destroys career!

What About PPP and COVID-19 Loan Fraud?

PPP fraud prosecutions are MASSIVE priority for DOJ!

Paycheck Protection Program and EIDL loans administered through banks! False applications charged as bank fraud! Government has prosecuted thousands of PPP fraud cases – even small loans under $20,000!

Common PPP fraud allegations: false number of employees, inflated payroll expenses, claiming ineligible businesses, using loan for unauthorized purposes, multiple applications using different businesses! Each false statement on application is bank fraud count!

We’ve seen HARSH sentences for PPP fraud despite small amounts! Defendant got 5 years for $200,000 PPP fraud! Another got 3 years for $85,000 fraud! Courts showing no leniency despite COVID-19 context!

Government using data analytics to detect fraud! Comparing applications across databases, checking business registrations, analyzing tax returns! If you received PPP loan with ANY false statements, expect investigation!

Self-disclosure and repayment MAY help but don’t guarantee no prosecution! Some defendants who repaid still got prosecuted! But cooperating early and showing good faith helps at sentencing!

What Are Defenses to Bank Fraud?

Several defenses exist but require immediate action!

Lack of intent to defraud is primary defense! If you made honest mistakes on application or believed statements were accurate, no intent! We prove clients reasonably believed information was correct, disclosed material facts, had good faith basis for statements!

No scheme to defraud! If differences between application and reality were minor errors not fraudulent scheme, no crime! Negligence isn’t fraud! Mistake isn’t fraud! Must prove intentional deception!

Statements were immaterial! If alleged false statements wouldn’t affect bank’s decision, not material enough for prosecution! Exaggerating minor details that don’t impact underwriting? Not material! We challenge materiality element!

Reliance on professionals! If accountant or attorney prepared loan application and you relied on their work, shows lack of intent! Must demonstrate you disclosed facts to professional and trusted their judgment!

No loss to financial institution! While not required element, juries more sympathetic when bank didn’t lose money! If loan fully repaid or bank made money on transaction, shows no intent to defraud!

Good faith business purpose! If loan was for legitimate business and you intended to repay, undermines fraud theory! Failed business isn’t fraud! Optimistic projections aren’t fraud! We show business was real and intent was legitimate!

Why Bank Fraud Defense Requires Specialized Financial Crime Attorneys

Look, we’re not your typical lawyers who don’t understand banking regulations and underwriting standards. We’re former federal prosecutors who CHARGED bank fraud cases and know EXACTLY what government must prove – especially intent element!

We understand how to challenge materiality of alleged false statements! We know when errors were innocent mistakes not criminal schemes! We can demonstrate good faith through business records and banking history! Most importantly, we prevent loan disputes from becoming federal prosecutions!

Other lawyers don’t challenge bank’s loss calculations! They accept government’s characterization of business optimism as fraud! Their ignorance leads to convictions for legitimate business borrowing!

Call us RIGHT NOW at 212-300-5196
Bank fraud investigations involve forensic accounting – act NOW!
Former federal prosecutors – Bank fraud defense specialists – Available 24/7!

Don’t speak to bank investigators or federal agents without experienced counsel! Banks refer suspected fraud to FBI and Secret Service! Any statements you make can become evidence! Assert your rights and call us IMMEDIATELY!

Remember – federal bank fraud isn’t about sophisticated crime rings, its about prosecutors interpreting loan application errors as criminal schemes. One overstated income figure, one incorrect business expense, one optimistic projection can mean 30 years in federal prison. You need someone who understands both banking practices AND criminal defense. Call us NOW before loan problem becomes federal prosecution!