Bank fraud is a serious white-collar crime that federal prosecutors often pursue vigorously.
Title 18 U.S.C. § 1344 makes it a crime to knowingly carry out or attempt a scheme to defraud a financial institution, or to use fraudulent pretenses/promises to obtain money, assets, credits, securities, or other property from these institutions.
Bank fraud is a federal crime because most banks, credit unions, and similar financial institutions are federally insured and backed. If you are convicted under this statute, you could face up to 30 years in prison.
Common types of bank fraud include credit card fraud, identity theft, phishing/spoofing, check fraud (such as forgery and kiting), mortgage fraud, and wire and mail fraud.
These often involve digital tactics like Business Email Compromise (BEC) or fake websites to steal money or data, resulting in losses from unauthorized purchases, false applications, or scams such as romance or tech support fraud.
While bank fraud can take many forms, federal prosecutors frequently pursue charges related to several common schemes.
Key Takeaways
- Federal bank fraud (18 U.S.C. § 1344) involves schemes to defraud financial institutions and carries penalties of up to 30 years in prison.
- Federal Bank Fraud carries a maximum penalty of 30 years in federal prison and a $1,000,000 fine. This law is triggered because institutions are federally insured.
- Common bank fraud schemes include check kiting, loan fraud, and account takeovers (ATO). The primary defenses are lack of intent, good faith, and mistaken identity.
- For borrowers, business owners, and real estate investors who submitted loan applications with figures that didn't perfectly match supporting documentation, understanding exactly what the government must prove, and where it can fail, is not just an academic exercise.
- Federal authorities such as the FBI and the IRS often focus on real estate developers and high-net-worth individuals engaged in luxury mortgage transactions.
- Federal prosecutors have a reliable tool to turn a manageable fraud case into a multi-year prison sentence: aggravated identity theft.
Let's look at some of the most common examples of bank fraud.
Check Fraud
Check fraud is one of the most frequently charged forms of bank fraud. It encompasses a range of illegal activities involving checks, such as creating counterfeit checks, altering legitimate checks to change the payee or amount, or forging signatures on checks drawn from real accounts.
Another common tactic involves depositing stolen checks and quickly withdrawing the funds before the bank can process the transaction and discover the theft. These cases often involve multiple financial institutions and repeated transactions that demonstrate a clear scheme to defraud.
Loan Application Fraud
This type of fraud is committed when an individual or business provides false information to obtain loans or credit from a federally insured bank.
Common examples include submitting false income, employment, or asset information; concealing existing debts; or using "straw borrowers" to apply for loans on behalf of another party.
Misrepresenting the purpose of a loan, such as claiming funds are for business use when they are for personal expenses, also falls under this category. This is frequently seen in mortgage applications and Small Business Administration (SBA) loan cases.
Wire Transfer and ACH Fraud
These schemes involve manipulating the electronic payment systems that banks use for wire transfers and Automated Clearing House (ACH) transactions.
An individual may initiate unauthorized wire transfers, compromise an account to send fraudulent ACH payments, or engage in business email compromise (BEC) schemes to trick a bank into rerouting funds to an illegal account.
These cases often overlap with separate federal charges for wire fraud and identity theft.
Credit and Debit Card Fraud
Fraudulent activity targeting card-issuing banks is a common federal offense. This includes using stolen or cloned credit or debit cards, making fraudulent charges or cash advances, and using "skimming" devices at ATMs or point-of-sale terminals to steal card data.
Even when a merchant is the initial victim, the bank that issued the card is typically the entity with the financial exposure that brings the conduct under federal jurisdiction.
Identity-Based Bank Fraud
This category involves using stolen or fabricated identities to deceive financial institutions. A person might use stolen personal information to open new bank accounts or take over existing ones in what is known as account takeover fraud.
Another method involves creating "synthetic identities," where a real Social Security number is combined with fake data to create a new, fraudulent identity to apply for credit. These cases can lead to enhanced charges for aggravated identity theft.
Insider or Employee Bank Fraud
Fraud committed by bank employees or other trusted insiders is considered a particularly serious offense due to the breach of trust involved.
Examples include employees making unauthorized withdrawals from customer accounts, manipulating internal bank systems to divert funds, or assisting outside conspirators in bypassing security measures.
Accepting bribes in exchange for providing unauthorized account access or approving fraudulent loans also constitutes insider fraud.
Account Takeover
An account takeover (ATO) happens when fraudsters gain control of an online account, usually through stolen credentials.
They can acquire these credentials easily by buying them on the dark web or through social engineering scams, data breaches, or phishing attacks, then use them to commit bank account fraud.
Once access is gained, the attacker can change the password to prevent the real owner from accessing the account. They might transfer funds to another account, make fraudulent payments, or open new accounts-often credit lines-in the victim's name.
ATOs lead to expensive disputes for banks, damaging the company's reputation and customer loyalty. They also result in significant financial losses for consumers.
What are the Common Defenses Against Bank Fraud Charges?
Facing a federal bank fraud investigation requires a strategic defense tailored to the specific facts of the case. A skilled federal criminal defense attorney can evaluate the charges and the facts of the case to develop a working defense strategy.
Common defenses against bank fraud charges include:
- Lack of Knowledge/Intent: One of the most critical elements the prosecution must prove is that you acted knowingly, with the specific intent to defraud the financial institution. A defense can be built around demonstrating that your actions were the result of a mistake, an error in judgment, or a misunderstanding, rather than a deliberate attempt to deceive.
- Mistaken Identity: In cases involving stolen identities or online fraud, an innocent person can be wrongly accused. A defense of mistaken identity argues that you were not the person who committed the fraudulent act. This can be supported by alibis, digital evidence, or other proof showing you could not have been responsible.
- Good Faith: Your attorney may argue that you acted in good faith, believing your statements or actions were truthful and legitimate at the time. If it can be shown that you had a reasonable belief that you were not committing fraud, this can also negate the element of intent.
- Duress or Coercion: In some situations, a defendant may have been forced or coerced into participating in a fraudulent scheme by another party. This defense argues that you did not act of your own free will and only committed the act under threat of harm to yourself or others.
In summary, if you are under investigation or have been arrested for federal bank fraud charges, contact our federal criminal defense law firm at Eisner Gorin LLP in Los Angeles for a case evaluation.
