18 U.S.C. § 1344 has two prongs: a scheme to defraud a financial institution, and a scheme to obtain money or property owned by or under the custody of a financial institution by false or fraudulent pretenses. The second prong is broader than most people expect, and it is why conduct that never targeted a bank directly can still be charged as bank fraud.
Waxman Litigation acts for companies and their boards. Seth B. Waxman spent 13 years as an Assistant United States Attorney in the District of Columbia, roughly eight of them on fraud and public corruption.
The two prongs
Section 1344 carries a maximum of 30 years and a fine of up to $1,000,000, and reaches both a scheme to defraud a financial institution and a scheme to obtain its funds by false pretenses.
Whoever knowingly executes, or attempts to execute, a scheme or artifice— (1) to defraud a financial institution; or (2) 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; shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
18 U.S.C. § 1344What is usually charged alongside
| Provision | Reaches |
|---|---|
| 18 U.S.C. § 1344 | Scheme to defraud a financial institution, or to obtain its money by false pretenses |
| 18 U.S.C. § 1343 | Wire fraud, where interstate wires were used |
| 18 U.S.C. § 1956 / § 1957 | Money laundering and monetary transactions in criminally derived property |
| 18 U.S.C. § 1001 | False statements in a federal matter |
When a financial institution reports
Investigations often begin with a report from the institution itself, which means the government may have documents before the company knows there is an inquiry. Preservation and an early, properly-run internal investigation matter more here than in almost any other setting.
Frequently asked questions
Does the bank have to lose money?
The statute is written around a scheme; loss is not the sole measure. How that applies to particular facts is what an investigation and, if charged, a court would examine.
What if the loan documents were prepared by someone else?
Who prepared a document and who is responsible for a scheme are different questions, and the answer is fact-specific.
Is this only about banks?
The offense reaches financial institutions as defined in federal law, which is broader than the word bank suggests. See § 1344.
Should we contact the bank?
Do not contact the bank before taking advice. Communications after an inquiry begins carry their own risk under §§ 1001, 1512 and 1519.
Who can be charged with bank fraud?
Anyone who executes the scheme, inside the institution or outside it. 18 U.S.C. § 1344 reaches whoever knowingly executes or attempts to execute a scheme to defraud a financial institution, or to obtain money, funds, credits, assets, securities or other property owned by or under the custody or control of one by false or fraudulent pretenses.
Why is the deadline twice as long as for ordinary fraud?
Because Congress wrote a separate rule for financial-institution cases. 18 U.S.C. § 3293(1) gives the government 10 years for a violation of § 1344, and § 3293(2) extends the same 10 years to mail fraud under § 1341 and wire fraud under § 1343 where the offense affects a financial institution — double the five years § 3282(a) allows generally.
Where does the bank’s report of the conduct go?
To a government agency, and not to the customer. Under 31 U.S.C. § 5318(g)(1) the Secretary may require a financial institution and its people to report a suspicious transaction relevant to a possible violation, and § 5318(g)(2)(A)(i) bars the institution and its current or former personnel from notifying any person involved in the transaction that it was reported.
How does a bank fraud case turn into a money laundering case?
Through what happened to the proceeds afterwards. 18 U.S.C. § 1957(a) reaches a knowing monetary transaction in criminally derived property worth more than $10,000 that came from specified unlawful activity, and § 1957(c) provides the Government need not prove the defendant knew which offense the property came from.
What penalties does a bank fraud conviction carry?
One of the heaviest penalties in the fraud chapter. 18 U.S.C. § 1344 provides for a fine of not more than $1,000,000 or imprisonment of not more than 30 years, or both — and under § 1957(b)(2) a laundering count can add an alternate fine of up to twice the amount of the criminally derived property involved.
Sources and legal authorities
General information about federal law, not legal advice, and not a prediction of any outcome. Federal criminal exposure turns on facts this page cannot assess. If your company has been contacted by investigators or has received a subpoena, take advice before gathering documents or interviewing staff.
Related: White-Collar Defense · Money Laundering · Government Subpoenas · Internal Investigations. Call (301) 901-3109 or use the contact page.