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False Entries

Making False Entries in Books, Reports, and Transactions - 18 U.S. Code § 1005 and 1006

Let's review the federal laws 18 U.S. Code 1005 bank entries, reports, and 18 U.S. Code 1006 federal credit institution entries, reports, and transactions.

In the United States, the banking and finance sectors are heavily regulated—especially regarding banks, credit unions, and similar entities connected to the Federal Reserve Bank or insured by federal funds. 

18 U.S. Code § 1005 - Bank entries, reports and transactions
Federal laws prohibit bank employees from making false entries with the intent to defraud.

Officers and employees of these institutions are held to high standards of accountability and transparency. When these rules are violated to defraud, they can be met with exceedingly severe penalties. 

Under 18 U.S. Code 1005 and 1006, it's a federal crime for these institutions' officers, employees, or agents to make false entries in any book, report, or statement intending to defraud. If convicted of this crime, you could face excessive fines and up to 30 years in federal prison.

18 U.S.C. 1005 says, “Whoever, being an officer, director, agent or employee of any Federal Reserve bank, member bank, depository institution holding company, 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, without authority from the directors of such bank, branch, agency, or organization or company, issues or puts in circulation any notes of such bank, branch, agency, or organization or company; or

Without such authority, whoever makes, draws, issues, puts forth, or assigns any certificate of deposit, draft, order, bill of exchange, acceptance, note, debenture, bond, or other obligation, or mortgage, judgment, or decree….

18 U.S.C. 1006 says, “Whoever, being an officer, agent, or employee of or connected in any capacity with the Federal Deposit Insurance Corporation, National Credit Union Administration, any Federal home loan bank, the Federal Housing Finance Agency, Farm Credit Administration, Department of Housing and Urban Development, Federal Crop Insurance Corporation, the Secretary of Agriculture, the Rural Development Administration…. with intent to defraud any such institution… makes any false entry in any book, report, or statement of or to any such institution… shall be fined or imprisoned….” 

Overview of Sections 1005 and 1006

Sections 1005 and 1006 address the crime of finance officers making false entries to defraud. These laws cover various financial entities, including Federal Reserve banks, national banks, insured banks, organizations operating under the Federal Reserve Act, and federal credit institutions like those authorized under the Federal Deposit Insurance Corporation and National Credit Union Administration. 

Section 1005 deals with banks connected with the Federal Reserve, while Section 1006 addresses federal credit unions, mortgage companies, and similar non-bank financial entities that are federally regulated or insured.

These laws strictly prohibit making false entries in any book, report, or bank or credit institution statement. A fraudulent entry could range from an inflated account balance to a non-existent transaction recorded to deceive. 

The law covers not only the creation of these false entries but also the unauthorized issuance or circulation of bank notes, unauthorized drawing of orders or bills of exchange, issuance of obligations without authorization, and participation in fraudulent acts.

What Are the Elements of the Crime?

Under Sections 1005 and 1006, it is a crime for an officer or employee of the financial institution to do any of the following activities with the intent to defraud:

  • Issue or circulate banknotes or other obligations without proper authorization.
  • Participate in (or profit from, directly or indirectly) any fraudulent transactions with a financial institution; or
  • Make false entries in any book, report, or statement of the bank or institution.

Under this law, the "intent to defraud" covers a wide swath of potential victims, including, but not limited to:

  • The banking or finance company itself.
  • Any company, individual, or group of individuals doing business with that institution or the United States.

Making false entries is often charged in tandem with other federal financial crimes, such as theft or embezzlement by a bank or credit union employee (18 U.S.C. 656 and 657), primarily because the false entry is often used to cover up the theft.

What Are Some Examples?

EXAMPLE 1: Jake, a bank employee, leveraging his privileged access to the institution's financial system, makes unauthorized withdrawals from several customer accounts. To cover up these illicit actions, the employee alters the bank's records, creating false entries to give the illusion that the funds are still present in the respective accounts. Jake can be charged under 18 U.S.C. 1005.

EXAMPLE 2: Jenny is a loan officer working at a federally insured bank who wishes to assist a friend in obtaining a loan. The friend, however, does not meet the bank's stringent credit requirements. To ensure the approval of the loan, the loan officer falsifies the friend's income and employment data in the bank's records. This act of creating false entries, with the deliberate intention to deceive the bank and its auditors, represents a serious violation of 18 U.S.C. 1005.

What Are the Related Federal Laws?

18 U.S. Code Chapter 47, fraud and false statements, have numerous federal laws related to 18 U.S.C. 1005 and 1006, such as the following: 

  • 18 U.S.C. 1001 - Making false statements,
  • 18 U.S.C. 1002 - Possession of false papers to defraud the United States,
  • 18 U.S.C. 1003 - Demands against the United States,
  • 18 U.S.C. 1004 - Certification of checks,
  • 18 U.S.C. 1007 - Federal Deposit Insurance Corporation transactions,
  • 18 U.S.C. 1010 - Department of Housing and Urban Development and Federal Housing Administration transactions,
  • 18 U.S.C. 1011 - Federal land bank mortgage transactions,
  • 18 U.S.C. 1012 - Department of Housing and Urban Development transactions,
  • 18 U.S.C. 1013 - Farm loan bonds and credit bank debentures,
  • 18 U.S.C. 1014 - Loan and credit applications generally; renewals and discounts; crop insurance,
  • 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 or sealed,
  • 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 for naval property,
  • 18 U.S.C. 1023 - Insufficient delivery of money or property for military or naval service
  • 18 U.S.C. 1024 - Purchase or receipt of military, naval, or veteran's facilities property,
  • 18 U.S.C. 1025 - False pretenses on high seas and other waters,
  • 18 U.S.C. 1026 - Compromise, adjustment, or cancellation of farm indebtedness,
  • 18 U.S.C. 1027 - False statements and concealment of facts in relation to documents required by the Employee Retirement Income Security Act of 1974,
  • 18 U.S.C. 1028 - Fraud and related activity in connection with identification documents, authentication features, and information,
  • 18 U.S.C. 1028A - Aggravated identity theft,
  • 18 U.S.C. 1029 - Fraud and related activity in connection with access devices,
  • 18 U.S.C. 1030 - Fraud and related activity in connection with computers,
  • 18 U.S.C. 1031 - Major fraud against the United States,
  • 18 U.S.C. 1032 - Concealment of assets from conservator, receiver, or liquidating agent,
  • 18 U.S.C. 1033 - Crimes by or affecting persons engaged in the business of insurance whose activities affect interstate commerce,
  • 18 U.S.C. 1034 - Civil penalties and injunctions for section 1033 violations,
  • 18 U.S.C. 1035 - False statements relating to health care matters,
  • 18 U.S.C. 1036 - Entry by false pretenses to any real property, vessel, or aircraft of the United States or secure area of any airport or seaport,
  • 18 U.S.C. 1037 - Fraud and related activity in connection with electronic mail,
  • 18 U.S.C. 1038 - False information and hoaxes,
  • 18 U.S.C. 1039 - Fraud and related activity in connection with obtaining confidential phone records information of a covered entity,
  • 18 U.S.C. 1040 - Fraud in connection with major disaster or emergency benefits.

What are the Penalties for Violations?

Both 18 U.S.C. 1005 and 1006 are serious federal felonies. If you are convicted of making false entries under either law, you could face:

  • Fines of up to $1 million and
  • Up to 30 years imprisonment.

What Are the Common Defenses?

While the penalties for making false entries are severe, there are several defenses that a seasoned federal criminal defense attorney can use to counter the charges. These include, but are not limited to:

  • Lack of Intent to Defraud or Deceive: To convict you of a crime, the prosecution must prove beyond reasonable doubt that you had the intent to injure or defraud the financial institution or deceive any officer thereof or the Comptroller of the Currency or the Federal Deposit Insurance Corporation.  Showing that you had no such intent is a powerful defense.
  • Mistake or Error: Your attorney could argue that the false entries were made due to an error or mistake rather than deliberate deceit or fraud.
  • Coercion or Duress: If you were forced or pressured into making false entries under threat of harm, this may also be a valid defense to the charges.

If you are under a criminal investigation or indicted, contact our law firm to review the case details and legal options. Perhaps we can negotiate with the federal prosecutor for a favorable plea agreement if guilt is not in doubt. Eisner Gorin LLP is based in Los Angeles, California.

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