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Banking Fraud Crimes

In 1984, 18 U.S.C. § 1344 was passed under the Comprehensive Crime Control Act to enable the prosecution of fraud crimes committed against financial institutions that are controlled, created, or insured by the federal government. Bank fraud is defined as a crime that one executes or endeavors to execute “knowingly.” Furthermore, bank fraud is “a scheme or artifice to defraud a financial institution, or to obtain property owned by or under the control of a financial institution, by means of false or fraudulent pretenses, representations, or promises." (BLACK'S LAW DICTIONARY 685, 8th ed. 2005).

18 U.S.C. § 1344 (2005)

The Crime
Unlike the statutes for wire fraud or mail fraud, section 1344 is quite straight forward. Under this statute, it is a crime for a person to "knowingly" execute, or attempt to execute, a scheme or artifice

  • to defraud a financial institution; 18 U.S.C. § 1344(1) (2005), or
  • to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises; id. § 1344 (2005).

The Punishment
The punishment for a violation of section 1344 is

  • a fine of not more than $ 1,000,000,
  • imprisonment for not more than 30 years,
  • or both. Id. § 1344 (2005).

Case Law Interpreting Section 1344
Congress intended section 1344 to have more limited reach than its wire fraud and mail fraud brethren. "An examination of the Congressional history of the statute reveals that Congress enacted the statute for the purpose of protecting financial institutions from the perpetration of fraud on them, leaving to the states the traditional prosecution of crimes of larceny, embezzlement and fraudulent conversions." United States v. Thomas, 315 F.3d 190, 196 (3d Cir. 2002). Therefore, state-chartered, non-federally-insured branches of foreign banks would not fall under the purview of section 1344 since its principal oversight comes from the state, not federal regulatory systems. United States v. Lewis, 67 F.3d 225, 231-32 (9th Cir. 1995).

In Thomas, supra, the court determined that a "scheme to defraud" is measured "by determining whether the scheme demonstrated a departure from fundamental honesty, moral uprightness, or fair play and candid dealings in the general life of the community." Id. Furthermore, each execution of a scheme to defraud is a "unit" for an offense under section 1344, not each particular act done in furtherance of the scheme. United States v. De La Mata, 266 F.3d 1275, 1287 (11th Cir. 2001). Therefore, the decision of whether a particular transaction is an execution of a scheme or merely a component of a scheme depends on several factors. Id. at 1288. These factors include the ultimate goal of the scheme, the nature of the scheme, the benefits intended under the scheme, the interdependence of acts committed under the scheme, and the number of parties involved. Id.

While one of the elements of a violation of section 1344 is intent, intent to harm is not required; all that is required is an intent to deceive the bank in order to obtain money or other property. United States v. Kenrick, 221 F.3d 19 27 (1st Cir. 2000). Furthermore, the bank does not actually need to be harmed as long as the defendant acted with the requisite intent. United States v. Barrett, 178 F.3d 643, 648 (2d Cir. 1999). Some courts do not even require a showing that the defrauded bank suffered a financial loss. See United States v. Ponec, 163 F.3d 486, (8th Cir. 1998). Other courts, however, disagree. See Thomas, supra, at 200, n.3 ("We believe that, given the legislative intent, harm or loss to the bank must be contemplated by the wrongdoer to make out a crime of bank fraud.")

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