From the classic novel The Merry Adventures of Robin Hood to the binge-worthy television show Money Heist, tales about bank heists and financial crimes have always fascinated people.
Whether people enjoy these fictional stories for the thrill or the “rob-the-rich-to-feed-the-poor” motif, the intrigue surrounding institutional frauds and robberies continues to captivate audiences.
However, in the real world, bank fraud is a grave offense with severe consequences. This crime undermines trust in financial institutions and opportunities and often targets the vulnerable population, including the poor and the elderly.
Suppose you or a loved one is facing bank fraud charges. In that case, you should know what constitutes the alleged crime.
Meanwhile, if you’re a victim of bank fraud, you likely want the perpetrators punished to the full extent of the law. As such, you should know the jail time and other penalties awaiting offenders.
This article discusses bank fraud, exploring its different forms and why the private sector and the government consider the crime a severe offense.
Learn more about the possible incarceration time and punishments those convicted of bank fraud may face.
What Is Bank Fraud?
Bank fraud uses deception, pretense, or false representations or information to get money from a bank, financial institution, or depositors.
Will You Get Jail Time for a Bank Fraud Conviction?
Yes. Bank fraud is a white-collar crime involving defrauding a financial institution. People guilty of this crime have deliberately and knowingly devised a scheme to steal from a financial institution.
Possible Jail Time for Bank Fraud
Under federal law, people convicted of bank fraud may have to serve a maximum prison term of 30 years. Moreover, they have to pay a fine of up to $1,000,000.
Bank Fraud Under U.S. Law
Title 18 of the U.S.C. (United States Code), section 1344 considers an individual guilty of bank fraud if they knowingly execute, attempt to commit, or artifice (devise a clever scheme) the following:
- Defraud a financial institution
- Acquire funds, money, assets, credits, securities, or other property owned by, or under the control or custody of, a financial institution using false pretenses, misrepresentations, or fraudulent promises
The Bank Fraud Statute – 18 U.S.C. § 1344
This statute covers any scheme to commit fraud on or following October 12, 1984. The statutory language closely resembles the mail fraud statute.
The legislative history indicates that the bank fraud statute’s original purpose was to cover check-kiting cases and supplement Title 18 of the U.S.C., section 2113 (statutes on bank robbery and incidental crimes) when financial institution property is seized under false pretenses without the common law “taking and carrying away” of the property.
The general bank fraud statute also supplements, rather than replaces, other criminal provisions that apply to fraud committed against financial institutions. The choice of offenses should depend on the facts of each case.
Other Statutes Used in Bank Fraud Cases
Federal prosecutors can and often file multiple charges during the prosecution. In a bank fraud case, criminal charges may include income tax offenses, money laundering, wire fraud, or aggravated identity theft.
Bank Fraud Statute of Limitations
The statute of limitations declares how long the prosecuting side can wait after the crime to file charges.
Generally, the period depends on the crime charged. The federal bank fraud statute of limitations may be five years, so if the alleged criminal activity happened over five years ago and nobody prosecuted you, your case is over.
However, states may have different statutes of limitations depending on the specific charges in the bank fraud allegation.
For example, Texas’ statute of limitations for most financial frauds, other than insurance fraud, is seven years.
Types of Bank Fraud and Examples
Here are the common types of bank fraud:
- Check fraud (deliberately bouncing checks or forgery)
- Credit or debit card fraud (stolen bank information)
- Safe deposit box fraud (identity theft or false representation)
Below is a list and explanation of other bank fraud crimes:
Accounting fraud primarily impacts business lending. Businesses that engage in accounting fraud manipulate the numbers to look more profitable on paper than in reality. Banks grant loans to these businesses based on these fraudulent statements.
However, these businesses cannot repay the loans because they are less profitable than reported – or sometimes even bankrupt. Banks may even be liable if they declare bankruptcy.
Fraudulent loans are similar to accounting fraud. Businesses and individuals may commit this crime by lying on credit report applications to borrow more money than they can afford.
Another form of loan fraud involves stealing another person’s identity to take out a loan and pretending the stolen financial information is the fraudster’s.
Wire Transfer Fraud
Wire fraud includes any fraud involving the internet or wire transfers. Sometimes, scammers steal from banking customers’ accounts and wire money to themselves.
A more common technique involves the scammer tricking the victim into wiring money by claiming to be someone in desperate need and requesting money for personal or business reasons.
This fraud may involve reprogramming or reformatting the machine or installing a card skimmer to steal card information. ATM (automated teller machine) fraud usually happens in high-traffic areas.
Check and Credit Card Fraud
Fraudulent use of credit cards and checks is among today’s most common bank fraud types. Along with the surge in online shopping, there has also been an uptick in credit and debit card fraud. Theft, forgery, and check-kiting (covering bad checks) are examples of fraud involving financial transaction devices.
Money laundering involves unlawfully gained money and people who attempt to give it the appearance of legitimacy.
While money laundering does not involve assets directly belonging to a bank, it does include misrepresenting the source of the funds to the institution. Therefore, bank fraud charges often accompany money laundering charges.
Internet Banking Fraud, Phishing Schemes, and Bank Impersonation
Electronic bank fraud involves tricking others into transferring funds to a fake account by impersonating a bank or setting up a phony website or fictional financial institution.
Phishing usually happens via emails, luring unsuspecting victims into making fraudulent purchases or transferring money under false pretenses.
Is the Paycheck Protection Program Fraud a Type of Bank Fraud?
Yes, so long as the fraud involves deceiving financial institutions.
The Paycheck Protection Program (PPP) is one of the most important legislative measures enacted following the COVID-19 pandemic.
Small Business Association (SBA) loans have enabled retail shops, dining establishments, and small businesses to stay afloat, despite economic losses due to the global crisis.
Unsurprisingly, scammers have exploited PPP for their purposes, mainly to con small business owners. Scammers pose as SBA representatives or legitimate lenders to obtain personal information from borrowers.
Cybercriminals may also send bogus emails appearing to be from the SBA to get victims to download malware.
Bank Fraud Investigations
A bank fraud investigation refers to banks’ standard process to verify fraud claims.
If fraud has occurred, the investigation must include protective action and, where applicable, the reimbursement of stolen property or money. The purposes of a bank fraud investigation include the following:
- Exposing fraud allegations
- Determining how and who committed the fraud
- Correcting the fraud
- Protecting the bank’s brand and customers
- Taking preventative measures to guard against future fraud
Banking looks very different today than it did in the past decades. Banks have fewer face-to-face interactions with customers as these clients migrate to online or mobile banking.
Fifty-one percent of U.S. adults, or 61% of internet users, bank online. 32% of U.S. adults, or 35% of cell phone owners, use mobile banking.
However, moving away from in-person banking has contributed to new and possibly increased bank fraud.
A growing number of suspected fraud incidents and sophisticated fraud schemes require banks to learn how to investigate suspected fraud more quickly and effectively.
Things You Should Know About Bank Fraud Charges
The DOJ (Department of Justice) considers the bank fraud statute a flexible tool. The agency has stated that the law allows the U.S. to prosecute fraudulent activities not otherwise covered by existing criminal regulations.
The statute covers any activity related to defrauding a federal bank, and its scope is quite broad.
State vs. Federal Bank Fraud Charges
A deciding factor regarding whether a bank fraud case will be state or federal is usually the amount of money involved.
Federal courts usually handle million-dollar cases. On the other hand, the state will probably take the case for a minor offense, such as bank fraud involving money under $10,000.
The Federal Bank Fraud Act in the United States Defines the Elements of Federal Bank Fraud Charges
Generally, the statute covers bank fraud involving a scheme that targets financial institutions. But judges may differ regarding the specific elements of the criminal charge.
Regional courts’ rulings vary regarding whether bank fraud occurs when the financial institution is indirectly affected due to the defendant’s scheme to take advantage of someone else.
Additionally, there is controversy over whether bank fraud applies when the bank is not at risk of losing money but funds or property in the bank’s custody are accessed by the defendant (situation B).
The statute is clear regarding incidents where the defendant directly victimizes the financial institution. Still, the statute’s applicability in the two situations mentioned has garnered mixed opinions among the different circuits.
Bank Fraud Is a Federal Crime With Severe Federal Penalties
Federal penalties apply to bank fraud, which is usually a federal crime. As such, bank fraud carries steep punishments, including lengthy prison sentences and heavy fines.
Bank Fraud Penalties Are Severe
Besides obvious criminal penalties, a federal bank fraud conviction can also affect your financial and social status even after serving your sentence.
If you have been convicted and can continue to work after your release, a federal bank fraud conviction on your record may hinder your employment opportunities, especially those involving money or fiduciary duties.
You May Face State Law Charges in Connection With the Alleged Criminal Acts That Led to Bank Fraud Charges
While bank fraud activities are usually federal, many state criminal charges related to bank fraud charges can be brought in conjunction with federal bank fraud charges.
In North Carolina, additional state offenses include the following:
- Writing invalid checks: A felony offense if the bogus payment slip is for more than $2,000
- Financial transaction card fraud: Unauthorized use of another individual’s credit or debit card or issuing false statements regarding your credit or debit cards
- Computer-related offenses: Crimes involving defrauding someone or extorting money via hacking
Bank Fraud Laws Are Closely Modeled on Existing Federal Mail Fraud Laws
The existing bank fraud statute is based on the established wire and mail fraud statutes, interpreted by courts to cover a wide range of fraudulent activity.
Federal Bank Fraud Charges Are Specifically Designed to Apply to a Wide Variety of Cases
You should learn the significance of “mail fraud” or “wire fraud” sentencing guidelines in a federal bank fraud case and events surrounding an inquiry and arrest. Understanding how federal bank fraud charges encompass many offenses is also crucial.
Federal bank fraud charges apply to various situations. According to the Department of Justice (DOJ), the general bank fraud statute supplements, rather than replaces, other laws about crimes committed against regulated financial institutions.
Federal Bank Fraud Charges in Conjunction With Other Related Federal Crimes
Federal bank fraud charges are usually filed along with related criminal offenses. Examples of other federal criminal charges often associated with bank fraud charges include the following:
- Wire fraud
- Email fraud
- Mail fraud
- Bank robbery
- Computer fraud and computer hacking
- Mortgage fraud
- Identity theft
Institutions Often Describe Bank Fraud as a White-Collar Crime
The FBI (Federal Bureau of Investigation) categorizes federal bank fraud charges and related offenses under white-collar crimes.
Financial institution fraud occurs when perpetrators target banks, credit unions, and other institutions.
Sometimes, fraud can result in the bankruptcy of a financial institution or credit union.
Many schemes involve exploiting customers’ accounts or private information. Misappropriation of funds and embezzlement are two of the most common crimes against financial institutions investigated by the FBI.
Multiple Defense Strategies May Be Available for Defendants to Fight Federal Bank Fraud Charges
You may be able to raise multiple bank fraud defenses regarding your case, including the following:
- Lack of intention: As shown above, intent is a primary aspect of any bank fraud charge. The prosecuting side must prove that you “knowingly” engaged in any activity constituting bank fraud.
Say you committed bank fraud but did not intend to defraud the institution. In that case, a “no intent” argument can lead to a favorable sentencing outcome.
- Duress: This defense involves proving that you committed the fraud under duress or pressure from people or circumstances.
- Immaterial fraudulent representations: You could also argue that any alleged fraudulent claims you made were inconsequential to the institution. This defense aims to prove you did not damage the bank in any way.
Litigating Loss Amount
Litigating loss amount in bank fraud cases carries a great deal of importance because years of a client’s life are on the line.
How much financial resources the institution lost is the driving factor of the sentencing guideline for bank fraud. In other words, the more money lost, the longer the sentence.
Do Not Expect to Have Your Conviction Expunged or Sealed
Federal judges can expunge (remove) or seal a federal criminal record. However, judges do not usually apply this prerogative. Therefore, if you have been charged with federal bank fraud, do not assume your history will be eligible for expunction or sealing.
What Happens if You Lie to a Bank?
Giving false statements to a financial institution is a crime in the U.S. If convicted of bank fraud, you may be fined up to $1,000,000 and imprisoned for 30 years.
U.S. Bank Fraud Punishment
Again, punishment for bank fraud may vary depending on the jurisdiction handling the defendant’s case.
In Texas, bank fraud can lead to felony or misdemeanor charges. Here’s how the state classifies this criminal activity:
- Class A misdemeanor (punishable by a maximum of 12 months in jail and fines up to $ 4,000)
- Forgery involving property loss of $750 or more but less than $2,500
- False financial statement to obtain credit or property involving a property value of or credit amount greater than $750 but less than $2,500
- State jail felony (punishable by up to two years in jail and up to a $10,000 fine)
Defenses for Bank Fraud Charges
Here are typical defenses for bank fraud charges:
- Lack of intent
- No material consequences or criminal fraud
- Unlawful search and seizure
- False allegation or mistaken identity
United States Sentencing Guidelines
The U.S. Sentencing Commission created these guidelines to ensure consistent sentencing for the same offense across the state and federal government.
The Commission aims to accomplish this goal by setting factors to help courts gauge offense levels.
Federal Sentencing Guidelines and Penalties
Many white-collar prosecutions are federal cases if they lead to an indictment.
A conviction for a white-collar crime usually carries profound personal, legal, and professional repercussions.
For example, the potential restitution amounts and federal prison sentences can be more severe under federal law than in state courts.
White-collar cases often involve complicated transactions, so the sentencing process requires a good grasp of the U.S. Sentencing Guidelines (USSG)
Conviction Penalties in Federal Court
Here are possible penalties for various financial criminal charges associated with bank fraud:
- Money laundering: When convicted of participating in a money laundering scheme, you may have to pay twice the value of the money laundered (maximum of $500,000). Additionally, guilty parties will serve a prison sentence depending on any underlying felonies they may have committed.
- Tax evasion: This crime carries a maximum fine of $100,000 (for any individual) and $500,000 (for corporations) and up to five years in federal prison.
- Mail and wire fraud: These criminal activities carry a maximum jail term of up to 20 years. The potential fine increases to $100,000 if the scheme involves a bank.
Can You Avoid Prison if Charged With Federal Bank Fraud?
Yes. A criminal charge is not the same as a conviction, so you still can avoid incarceration, provided you’re proven innocent in court.
Every case is different, so your criminal defense lawyer must be able to review and analyze all the details to formulate an effective defense.
Avoiding Federal Prison Time
Obviously, the best way to avoid getting behind federal prison bars is by not committing a federal crime in the first place.
Suppose you are innocent but do not know how to defend yourself. In that case, a competent criminal defense attorney can help you by doing the following:
- Representing your side of the story to the court
- Proving that the prosecuting side’s investigation is inconclusive or unfair
Say you do not have enough assets or money to hire a representative from a private law firm. In that case, some government and nonprofit groups offer free case evaluations and consultations.
Plea Bargaining With Federal Prosecutors
Having a clean criminal record and sufficient evidence that the losses resulting from your first-time bank fraud offense were minimal can help you and your lawyer negotiate a plea bargain with the prosecutor.
Sentence enhancements, or increased penalties due to associated factors, may occur when the amount of money involved is significant, or the victim is a member of a vulnerable group.
For federal cases, the prosecutors, the defense counsel, and, in some cases, the probation department will submit a sentencing memorandum to the judge.
This memorandum proposes the appropriate punishment the guilty party must receive for their alleged bank fraud.
Crucial Factors to Avoid Jail Time
Aside from proving your innocence, other factors that may help you avoid jail time or, at least, reduce the penalty include paying the stolen money upfront and active cooperation with the state or federal government.
- 18 U.S. Code § 1344 – Bank fraud
- 826. Applicability of 18 U.S.C. § 1344
- Statutes of Limitation for Crimes
- Paycheck Protection Program Scams
- 51% of U.S. Adults Bank Online
- The Federal Bank Fraud Statute: A Plain Interpretation
- White-Collar Crime
- PENAL CODE TITLE 7. OFFENSES AGAINST PROPERTY
- About Texas Misdemeanors