Embezzlement by Bank Officer - 18 U.S. Code § 656
Let's review the federal law of Title 18 U.S. Code 656, theft, embezzlement, or misapplication by bank officers or employees.
To protect the integrity and trust of the country's financial system, the U.S. government imposes strict rules and regulations that govern the actions of bank officers and employees, with severe penalties for those who violate them.
Embezzling or misappropriating funds is considered one of the most egregious violations of trust a bank employee can commit.
18 U.S.C. 656 says, “Whoever, being an officer, director, agent or employee of, or connected in any capacity with any Federal Reserve bank, member bank, depository institution holding company, a national bank, insured bank, branch or agency of a foreign bank, or organization operating under section 25 or section 25(a) [1] of the Federal Reserve Act, or a receiver of a national bank, insured bank, branch, agency, or organization or any agent or employee of the receiver, or a Federal Reserve Agent, or an agent or employee of a Federal Reserve Agent or of the Board of Governors of the Federal Reserve System.
… Embezzles, abstracts, purloins, or willfully misapplies any of the money, funds, or credits of such bank, branch, agency, organization or holding company or any money, funds, assets, or securities entrusted to the custody or care of such bank, branch, agency, or organization, or holding company or to the custody or care of any such agent, officer, director, employee or receiver, shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both; but if the amount embezzled, abstracted, purloined, or misapplied does not exceed $1,000, he shall be fined under this title or imprisoned not more than one year, or both.”
Simply put, under 18 U.S.C. 656, if you're a bank officer or employee accused of such a crime, you could face excessive fines and up to 30 years in prison if you're convicted.
18 U.S.C. 656 - Explained
Title 18 U.S.C. 656 is a federal law that makes it a crime for an officer, director, agent, or employee of, or connected in any capacity with a bank under U.S. authority, to willfully misapply, embezzle, or purloin (steal) any of the money, funds, or credits of the bank or institution they work for.
The comprehensive law covers many actions that could be considered misappropriation of bank funds. To understand the scope of this law, some definitions are in order:
- Embezzlement is a type of white-collar crime where a person who has been trusted with funds or assets misappropriates them for their use. In a banking setting, embezzlement can occur when a bank officer or employee uses the bank's funds for personal gain.
- Purloin refers to the act of stealing something, mainly when done in a subtle or secretive manner. It's often associated with instances where trust is violated.
- Misapplication involves the wrongful or unlawful use of funds entrusted to a bank officer or employee. This can include using these funds for unauthorized purposes or lending them out improperly.
Additionally, 18 U.S.C. 656 effectively applies to officers and employees in any financial institution directly or indirectly connected with the federal government or Federal Reserve. These include, but are not limited to:
- All “member banks” under the Federal Reserve (including state, local, and national).
- All FDIC-insured institutions.
- Depository institution holding companies (i.e., companies that own/operate financial institutions under this system).
- Branches of foreign banks operating in the United States.
- An "insured bank" includes any bank, banking association, trust company, savings bank, or other banking institution, the deposits of which are insured by the Federal Deposit Insurance Corporation.
- A “depository institution holding company” has the meaning given such term in section 3 of the Federal Deposit Insurance Act.
What Are the Elements of the Crime?
To convict you under 18 U.S.C. 656, federal prosecutors must prove the following elements beyond a reasonable doubt:
- You were an officer, employee, or agent of a qualifying banking institution operating under the federal banking system at the time of the offense.
- You stole, embezzled, or otherwise misapplied funds connected with that institution; and
- You did so willingly and with intent to defraud the bank or its customers.
What Are Some Examples?
EXAMPLE 1: John, a bank manager at a federally insured bank, knowingly approves an unauthorized loan of $50,000 to a fictitious individual. He then withdraws the loan amount and uses it for personal expenditures. John's act violates 18 U.S.C. 656 as he willingly misused the bank's funds for personal gain, demonstrating an intent to defraud the bank.
EXAMPLE 2: Sarah, a teller at a credit union, systematically diverts small amounts of money from multiple customer accounts into her own over several months. The total amount diverted reaches $20,000. Despite the seemingly insignificant amounts taken from each account, Sarah's actions violate 18 U.S.C. 656, as she is an employee of a financial institution who has willfully misapplied funds with the intent to defraud.
What Are the Related Federal Laws?
18 U.S. Code Chapter 31, embezzlement and theft, has several federal statutes that are related to section 656, theft, embezzlement, or misapplication by bank officer or employee, including the following:
- 18 U.S.C. 641 - Public money, property, or records,
- 18 U.S.C. 642 - Tools and materials for counterfeiting purposes,
- 18 U.S.C. 643 - Accounting generally for public money,
- 18 U.S.C. 644 - Banker receiving unauthorized deposit of public money,
- 18 U.S.C. 645 - Court officers generally,
- 18 U.S.C. 646 - Court officers depositing registry money,
- 18 U.S.C. 647 - Receiving a loan from a court officer,
- 18 U.S.C. 648 - Custodians generally misuse public funds,
- 18 U.S.C. 649 - Custodians failing to deposit money; persons affected,
- 18 U.S.C. 650 - Depositaries failing to safeguard deposits,
- 18 U.S.C. 651 - Disbursing officer falsely certifying full payment,
- 18 U.S.C. 652 - Disbursing officer paying lesser in lieu of lawful amount,
- 18 U.S.C. 653 - Disbursing officer misusing public funds,
- 18 U.S.C. 654 - U.S. officer or employee converting property of another,
- 18 U.S.C. 655 - Theft by bank examiner,
- 18 U.S.C. 657 - Lending, credit, and insurance institutions,
- 18 U.S.C. 658 - Property mortgaged or pledged to farm credit agencies,
- 18 U.S.C. 659 - Interstate or foreign shipments by carrier,
- 18 U.S.C. 660 - Carrier's funds derived from commerce,
- 18 U.S.C. 661 - Within special maritime and territorial jurisdiction,
- 18 U.S.C. 662 - Receiving stolen property within the special maritime and territorial jurisdiction,
- 18 U.S.C. 663 - Solicitation or use of gifts,
- 18 U.S.C. 664 - Theft or embezzlement from an employee benefit plan,
- 18 U.S.C. 665 - Theft or embezzlement from employment and training funds; improper inducement; obstruction of investigations,
- 18 U.S.C. 666 - Theft or bribery with programs receiving Federal funds,
- 18 U.S.C. 667 - Theft of livestock,
- 18 U.S.C. 668 - Theft of major artwork,
- 18 U.S.C. 669 - Theft or embezzlement in connection with healthcare,
- 18 U.S.C. 670 - Theft of medical products.
What Are the Penalties?
Suppose you're a bank employee convicted of stealing, embezzling, or misappropriating funds, violating 18 U.S.C. 656. In that case, the penalties will depend mainly on the amount taken—but sentencing can be particularly extreme even by federal standards due to the severe violation of trust involved.
If the amount involved is less than $1000, you could face:
- Up to one year in federal prison and
- Fines of up to $100,000.
If the amount is greater than $1000, the maximum penalties are:
- Up to 30 years in prison and
- Fines of up to $ 1 million.
What Are the Common Defenses?
Defending against charges under 18 U.S.C. 656 can be complex, but a qualified federal criminal defense attorney can employ several defense strategies to combat the charges. These include, but are not limited to:
- Lack of Intent: Willful intent is critical to this crime. If your defense successfully argues that you did not intend to defraud or harm the bank or its customers, it could lead to acquittal or dismissal of the charges.
- Mistake or Error: If you can show that the misappropriation of funds resulted from an honest mistake or error rather than intentional misconduct, this could serve as a valid defense.
- Duress or Coercion: If you can show that you were forced or coerced into committing the crime under threat of harm, it may mitigate the charges.
If you are under investigation or indicted, contact our law firm to review the case details and legal options. Eisner Gorin LLP has offices in Los Angeles, California.
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