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. § 1344
What 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?
§ 1344 concerns financial institutions as defined in federal law.
Should we contact the bank?
Not before taking advice — communications after an inquiry begins carry their own risk under §§ 1001, 1512 and 1519.
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.