Fraudulent Checks

18 U.S. Code § 1004 - Fraudulent Certification of Checks 

The United States banking system is highly regulated to preserve trust and reliability within the system. When that system is compromised through fraudulent activity, it creates loss and weakens the integrity of the system itself.

It's a federal crime for a banking employee to fraudulently certify a check before funds are available.

To that effect, Title 18 U.S. Code 1004 makes it a federal crime for any official or employee in the banking system to fraudulently certify a check before the funds are available in the account on which it is drawn.

18 U.S.C. 1004 says, “Whoever, being an officer, director, agent, or employee of any Federal Reserve bank, a member bank of the Federal Reserve System, insured bank, as defined in section 3(h) of the Federal Deposit Insurance Act, branch or agency of a foreign bank, as such terms are defined in paragraphs (1) and (3) of section 1(b) of the International Banking Act of 1978, or organization operating under section 25 or section 25(a) [1] of the Federal Reserve Act, certifies a check before the amount thereof has been regularly deposited in the bank, branch, agency, or organization, by the drawer thereof, or resorts to any device, or receives any fictitious obligation, directly or collaterally, in order to evade any of the provisions of law relating to certification of checks, shall be….”

If you're convicted of this crime, you could face steep fines and up to five years in prison. Let's review this federal law in more detail below.

Background of 18 U.S.C. 1004

Title 18 U.S.C. 1004 is one of the collection of laws in Chapter 47 of the criminal code dealing with fraud and false statements. Many of these statutes directly protect the integrity of the federal banking system and all its institutions.

The fraudulent certification of checks often occurs as part of a large-scale illegal scheme.

Specifically, Section 1004 targets the fraudulent certification of checks—a practice that can threaten the integrity of financial transactions and business activities.

False certification can happen for many reasons, but it often occurs as part of larger fraudulent schemes or within the framework of organized crime.

What is Check Certification? 

Check certification is when an official or employee of a financial institution, such as a bank, certifies sufficient funds in the account on which a check is drawn to cover it. This certification is critical to ensure that checks are correctly presented and accepted when adequate funds are available for payment.

What Does the Law Say?

As noted, Title 18 U.S. Code 1004 prohibits any officer, director, agent, or employee of any banking institution within the Federal Reserve System from certifying a check without verifying that the drawer of the check (i.e., the person or organization issuing the check) has sufficient funds in their account to cover the check.

Specifically, 18 U.S.C. 1004 makes it a federal crime to do either of the following:

• To certify the check before funds are available in the account; or
• To do any other activity or "workaround" that attempts to manipulate or bypass this requirement.

To procure a conviction under 18 U.S.C. 1004, federal prosecutors must prove the following elements:

• You were an officer, director, agent, or employee of a bank or related financial institution;
• You certified a check as payable before the funds were deposited into the drawer's account; and
• You were aware at the time that the account had insufficient funds.

What Are the Related Federal Laws?

18 U.S. Code Chapter 47 Fraud and False Statements has several federal statutes related to 18 U.S.C. 1004 certification of checks, such as the following:

• 18 U.S.C. 1001 – statements or entries generally; 
• 18 U.S.C. 1002 – possession of false papers;
• 18 U.S.C. 1003 – demands against the United States;
• 18 U.S.C. 1005 – bank entries, reports, and transactions;
• 18 U.S.C. 1006 – federal credit institution reports;
• 18 U.S.C. 1007 – federal deposit insurance corporation transactions;
• 18 U.S.C. 1010 – department of housing transaction;
• 18 U.S.C. 1011 – federal land bank mortgage transactions;
• 18 U.S.C. 1012 – department of urban development transactions;
• 18 U.S.C. 1013 – farm loan bonds and credit bank debentures;
• 18 U.S.C. 1014 – loan and credit applications;
• 18 U.S.C. 1015 – naturalization, citizenship or alien registry;
• 18 U.S.C. 1016 – acknowledgment of appearance or oath;
• 18 U.S.C. 1017 – government seals wrongfully used;
• 18 U.S.C. 1018 – official certificates or writings;
• 18 U.S.C. 1019 – certificates by consular officers;
• 18 U.S.C. 1020 – highway projects;
• 18 U.S.C. 1021 – title records;
• 18 U.S.C. 1022 – delivery of certificate, voucher, receipt;
• 18 U.S.C. 1023 – insufficient delivery of money or property;
• 18 U.S.C. 1024 – purchase or receipt of military property;
• 18 U.S.C. 1025 – false pretenses on high seas and other waters;
• 18 U.S.C. 1026 – compromise of farm indebtedness;
• 18 U.S.C. 1027 – false statements and concealment of facts;
• 18 U.S.C. 1028 – fraud related to identification documents;
• 18 U.S.C. 1028A – aggravated identity theft;
• 18 U.S.C. 1029 – fraud related to access devices;
• 18 U.S.C. 1030 – fraud related to computers;
• 18 U.S.C. 1031 – major fraud against the United States
• 18 U.S.C. 1032 – concealment of assets from conservator;
• 18 U.S.C. 1033 – crimes affecting insurance interstate commerce;
• 18 U.S.C. 1034 – civil penalties and injunctions for section 1033;
• 18 U.S.C. 1035 – false statements on health care matters;
• 18 U.S.C. 1036 – entry by false pretenses to any real property;
• 18 U.S.C. 1037 – fraud related to electronic mail;
• 18 U.S.C. 1038 – false information and hoaxes;
• 18 U.S.C. 1039 – fraud with obtaining confidential phone records;
• 18 U.S.C. 1040 – fraud with major disaster or emergency benefits;
• 18 U.S.C. 1344 – bank fraud: 
• 18 U.S.C. 472 – passing counterfeit obligations of the United States;

What Are the Penalties for 18 U.S.C. 1004?

Fraudulently certifying a check is a federal felony offense accompanied by stiff penalties. If you are convicted of this crime, you could face the following penalties:

• Fines up to $250,000; and
• Up to five years in prison.

What Are the Defenses for 18 U.S.C. 1004?

While the law is stringent and the consequences of a violation are severe, a skilled federal criminal defense attorney can still implement several defense strategies to counter the charges effectively. Common defenses are discussed below.

Contact our law firm to review the case details.

Perhaps we can argue that you had no intent to defraud. Your attorney may argue that the false certification was a mistake rather than an intent to bypass the law. This defense could either reduce your penalty or get the charges dropped when supported with evidence.

Perhaps we can argue that there was no knowledge of insufficient funds. Your attorney may show that at the time you certified the check, to the best of your knowledge, you believed the funds were available to cover the check.

Perhaps we can argue there was a mistake of fact. Your attorney may argue that the false certification resulted from a banking error, such as misreading the ledgers or false input in the system that led you to believe funds were available.

Perhaps we can argue that you acted under duress. Your attorney could present evidence that you committed the act because you were threatened or felt a real and immediate threat of harm to yourself or your family if you did not comply. While this defense doesn't necessarily absolve you of the crime, it can lead to leniency or dropped charges.

You can contact our law firm by phone or using the contact form for a case review. Eisner Gorin LLP is based in Los Angeles, California.