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|related_offenses = [[Wire Fraud|Wire Fraud]], [[Mail Fraud|Mail Fraud]], [[Money Laundering|Money Laundering]]
|related_offenses = [[Wire Fraud|Wire Fraud]], [[Mail Fraud|Mail Fraud]], [[Money Laundering|Money Laundering]]
}}
}}
'''Bank fraud''' is a federal crime under 18 U.S.C. § 1344 that prohibits schemes to defraud federally chartered or insured financial institutions, or to obtain money, funds, credits, assets, securities, or other property owned by or under the custody or control of such institutions by means of false or fraudulent pretenses, representations, or promises.<ref name="uscode-1344">18 U.S.C. § 1344.</ref>
'''Bank fraud''' is a federal crime under 18 U.S.C. § 1344. It prohibits schemes to defraud federally chartered or insured financial institutions. The law also covers attempts to obtain money, funds, credits, assets, securities, or other property owned by or under the custody or control of such institutions by means of false or fraudulent pretenses, representations, or promises.<ref name="uscode-1344">18 U.S.C. § 1344.</ref>


Bank fraud carries a maximum sentence of 30 years imprisonment—significantly higher than the 20-year maximum for wire and mail fraud—reflecting Congress's determination to provide enhanced protection for the federal banking system. The offense also carries fines up to $1,000,000.<ref name="uscode-1344" />
The penalties are severe. Bank fraud carries a maximum sentence of 30 years in prison, which is significantly higher than the 20-year maximum for wire and mail fraud. Congress made this choice deliberately, signaling its commitment to stronger protection for the federal banking system. On top of that, defendants face fines up to $1,000,000.<ref name="uscode-1344" />


== Elements of the Offense ==
== Elements of the Offense ==


Section 1344 creates two separate offenses, either of which can support a bank fraud conviction:
Section 1344 actually creates two separate offenses. Either one can support a conviction.


=== Section 1344(1) - Scheme to Defraud ===
=== Section 1344(1) - Scheme to Defraud ===
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=== Section 1344(2) - Obtaining Property by False Pretenses ===
=== Section 1344(2) - Obtaining Property by False Pretenses ===


To convict under § 1344(2), the government must prove:
Under § 1344(2), the government must establish three things:


# '''Scheme to Obtain Property''': The defendant knowingly executed or attempted to execute a scheme to obtain money, funds, credits, assets, securities, or other property
# '''Scheme to Obtain Property''': The defendant knowingly executed or attempted to execute a scheme to obtain money, funds, credits, assets, securities, or other property
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=== Financial Institution ===
=== Financial Institution ===


The term "financial institution" is defined in 18 U.S.C. § 20 to include:
What counts as a "financial institution"? The statute defines this in 18 U.S.C. § 20. It includes:


* Banks insured by the FDIC
* Banks insured by the FDIC
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=== No Wire or Mail Required ===
=== No Wire or Mail Required ===


Unlike wire or mail fraud, bank fraud does not require proof that the defendant used any particular instrumentality (wires or mail). The offense is complete when the defendant executes or attempts to execute the fraudulent scheme against a covered financial institution.
Here's a key difference from other fraud statutes. Bank fraud doesn't require proof that the defendant used any particular instrumentality like wires or mail. The offense is complete once the defendant executes or attempts to execute the fraudulent scheme against a covered financial institution. That's it.


== Statutory Penalties ==
== Statutory Penalties ==
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|}
|}


The substantially higher maximum sentence for bank fraud (30 years) compared to wire and mail fraud (20 years) reflects Congress's intent to provide enhanced protection for federal financial institutions.
Congress deliberately set the maximum sentence for bank fraud at 30 years, well above the 20-year cap for wire and mail fraud. This reflects a clear intent to protect federal financial institutions with enhanced punishment.


In addition to imprisonment and fines, defendants face:
Beyond prison time and fines, defendants also face:


* Restitution to the defrauded institution
* Restitution to the defrauded institution
* Forfeiture of proceeds
* Forfeiture of proceeds
* Civil money penalties from banking regulators
* Civil money penalties from banking regulators
* Industry bars preventing future employment in banking<ref name="uscode-1344" />
* Industry bars that prevent future employment in banking<ref name="uscode-1344" />


== Federal Sentencing Guidelines ==
== Federal Sentencing Guidelines ==


Bank fraud is sentenced under USSG §2B1.1, the same guideline that governs wire fraud, mail fraud, and other theft and fraud offenses.
Bank fraud is sentenced under USSG §2B1.1. The same guideline covers wire fraud, mail fraud, and other theft and fraud offenses.


=== Base Offense Level ===
=== Base Offense Level ===


The base offense level for bank fraud under §2B1.1(a) is:
The starting point under §2B1.1(a) is:
* '''7''' if the offense involved fraud or deceit
* '''7''' if the offense involved fraud or deceit
* '''6''' if the offense did not involve fraud or deceit<ref name="ussg-2b1">United States Sentencing Commission, USSG §2B1.1 (2024).</ref>
* '''6''' if it didn't<ref name="ussg-2b1">United States Sentencing Commission, USSG §2B1.1 (2024).</ref>


=== Loss Amount Enhancements ===
=== Loss Amount Enhancements ===


The most significant enhancement typically comes from the amount of loss caused by the fraud. The loss enhancement table under §2B1.1(b)(1) applies:
The amount of loss is usually the biggest factor. The loss enhancement table under §2B1.1(b)(1) applies:


{| class="wikitable" style="width: 100%;"
{| class="wikitable" style="width: 100%;"
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=== Bank Fraud-Specific Enhancements ===
=== Bank Fraud-Specific Enhancements ===


Additional enhancements particularly relevant to bank fraud include:
Certain enhancements apply specifically to bank fraud:


* '''+2 levels''': If the defendant was an officer or employee of a financial institution and the offense involved abuse of the defendant's position
* '''+2 levels''': If the defendant was an officer or employee of a financial institution and the offense involved abuse of the defendant's position
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=== Check Kiting ===
=== Check Kiting ===


Check kiting exploits the float time between depositing a check and its clearance. The scheme involves:
Check kiting is surprisingly simple. It exploits the float time between when you deposit a check and when it clears. Here's how it works:


* Opening accounts at two or more banks
* Open accounts at two or more banks
* Writing checks between accounts before funds are available
* Write checks between accounts before funds are available
* Creating the appearance of sufficient funds through the float period
* Create the appearance of sufficient funds during the float period
* Withdrawing money before the scheme collapses
* Withdraw money before everything collapses


Check kiting causes losses when the scheme inevitably fails and the banks discover the insufficient funds.<ref name="fbi-bankfraud">FBI, "Financial Institution Fraud."</ref>
When the scheme inevitably fails, the banks discover insufficient funds and suffer losses.<ref name="fbi-bankfraud">FBI, "Financial Institution Fraud."</ref>


=== Loan Fraud ===
=== Loan Fraud ===


Loan fraud involves obtaining loans through false representations, such as:
Loan fraud happens when someone obtains a loan through false statements. Common tactics include:


* Misrepresenting income, assets, or employment on loan applications
* Misrepresenting income, assets, or employment on loan applications
* Providing false financial statements
* Providing false financial statements
* Submitting fraudulent collateral documentation
* Submitting fraudulent collateral documentation
* Identity theft to obtain loans in others' names
* Using identity theft to obtain loans in others' names


Loan fraud is particularly common in mortgage lending and SBA loans.<ref name="fbi-bankfraud" />
Mortgage lending and SBA loans are particularly vulnerable to this kind of fraud.<ref name="fbi-bankfraud" />


=== Credit Card Fraud ===
=== Credit Card Fraud ===


Schemes to defraud banks through credit card fraud include:
Banks face multiple types of credit card fraud schemes:


* Application fraud (using false information to obtain cards)
* Application fraud (using false information to obtain cards)
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=== Mortgage Fraud ===
=== Mortgage Fraud ===


[[Mortgage Fraud|Mortgage fraud]] is a subset of bank fraud that involves misrepresentations in mortgage transactions:
[[Mortgage Fraud|Mortgage fraud]] is a subset of bank fraud that focuses specifically on misrepresentations in mortgage transactions:


* Property flipping with inflated appraisals
* Property flipping with inflated appraisals
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=== PPP and EIDL Fraud ===
=== PPP and EIDL Fraud ===


Following the COVID-19 pandemic, federal prosecutors brought thousands of bank fraud cases related to the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL), including:
The COVID-19 pandemic created a massive fraud opportunity. Federal prosecutors brought thousands of bank fraud cases related to the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL). Schemes included:


* Fabricated businesses
* Fabricated businesses
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=== Identity Theft-Based Fraud ===
=== Identity Theft-Based Fraud ===


Using stolen personal information to:
Stolen personal information enables many fraud schemes:


* Open fraudulent accounts
* Open fraudulent accounts
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=== Todd and Julie Chrisley (2022) ===
=== Todd and Julie Chrisley (2022) ===


Reality TV stars [[Todd Chrisley]] and [[Julie Chrisley]] were convicted of bank fraud and tax evasion in 2022. The couple defrauded banks of over $30 million by providing false financial statements and tax returns to obtain loans. Todd Chrisley was sentenced to 12 years and Julie Chrisley was sentenced to 7 years in federal prison.<ref name="chrisley-conviction">U.S. Department of Justice, "Reality TV Stars Todd and Julie Chrisley Convicted of Federal Charges," June 7, 2022.</ref>
Reality TV stars [[Todd Chrisley]] and [[Julie Chrisley]] were convicted of bank fraud and tax evasion in 2022. They defrauded banks of over $30 million by providing false financial statements and tax returns to obtain loans. Todd received 12 years in federal prison. Julie got 7 years.<ref name="chrisley-conviction">U.S. Department of Justice, "Reality TV Stars Todd and Julie Chrisley Convicted of Federal Charges," June 7, 2022.</ref>


=== Paul Manafort (2018) ===
=== Paul Manafort (2018) ===


[[Paul Manafort]] was convicted of bank fraud charges related to obtaining over $20 million in loans from banks through false representations about his income and assets. He submitted doctored financial statements and fraudulent tax returns to lenders. He was sentenced to 7.5 years in federal prison on tax and bank fraud charges.<ref name="manafort-conviction">U.S. Department of Justice, "Paul J. Manafort Convicted of Tax and Bank Fraud," August 21, 2018.</ref>
[[Paul Manafort]] faced bank fraud charges related to obtaining over $20 million in loans through false representations. He submitted doctored financial statements and fraudulent tax returns to lenders. His sentence was 7.5 years in federal prison on tax and bank fraud charges.<ref name="manafort-conviction">U.S. Department of Justice, "Paul J. Manafort Convicted of Tax and Bank Fraud," August 21, 2018.</ref>


=== Ippei Mizuhara (2024) ===
=== Ippei Mizuhara (2024) ===


Ippei Mizuhara, the former interpreter for Los Angeles Dodgers star Shohei Ohtani, pleaded guilty in 2024 to bank fraud and tax charges after stealing approximately $17 million from Ohtani to cover gambling debts. Mizuhara made fraudulent wire transfers from Ohtani's bank accounts, lying to bank employees about his authorization.<ref name="mizuhara-doj">U.S. Department of Justice, "Interpreter for Los Angeles Dodgers Star Shohei Ohtani Charged in Multimillion Dollar Theft," April 11, 2024.</ref>
Ippei Mizuhara was the interpreter for Los Angeles Dodgers star Shohei Ohtani. In 2024, he pleaded guilty to bank fraud and tax charges. He'd stolen approximately $17 million from Ohtani to cover gambling debts. Mizuhara made fraudulent wire transfers from Ohtani's bank accounts, lying to bank employees about his authorization.<ref name="mizuhara-doj">U.S. Department of Justice, "Interpreter for Los Angeles Dodgers Star Shohei Ohtani Charged in Multimillion Dollar Theft," April 11, 2024.</ref>


=== Allen Stanford (2012) ===
=== Allen Stanford (2012) ===


[[Allen Stanford]] was convicted of bank fraud and other charges in connection with a $7 billion Ponzi scheme. He sold fraudulent certificates of deposit through his Stanford International Bank in Antigua, promising impossibly high returns. He was sentenced to 110 years in federal prison.<ref name="stanford-conviction">U.S. Department of Justice, "R. Allen Stanford Convicted of Running $7 Billion Investment Fraud Scheme," March 6, 2012.</ref>
[[Allen Stanford]] ran a $7 billion Ponzi scheme that shocked the financial world. He sold fraudulent certificates of deposit through his Stanford International Bank in Antigua, promising impossibly high returns. The court sentenced him to 110 years in federal prison.<ref name="stanford-conviction">U.S. Department of Justice, "R. Allen Stanford Convicted of Running $7 Billion Investment Fraud Scheme," March 6, 2012.</ref>


=== PPP Fraud Cases (2020-Present) ===
=== PPP Fraud Cases (2020-Present) ===


Thousands of individuals have been prosecuted for PPP loan fraud since 2020. Notable cases include:
Thousands of people have been prosecuted for PPP loan fraud since 2020. Some notable examples:


* A Florida man who received $3.9 million in PPP loans and purchased a Lamborghini, sentenced to over 6 years
* A Florida man who received $3.9 million in PPP loans and bought a Lamborghini. Sentenced to over 6 years.
* An Atlanta pastor who obtained $1.5 million in PPP funds for fake businesses
* An Atlanta pastor who obtained $1.5 million in PPP funds for fake businesses.
* A California man who obtained over $9 million in PPP loans using fabricated documents<ref name="doj-ppp" />
* A California man who got over $9 million in PPP loans using fabricated documents.<ref name="doj-ppp" />


== Statistics ==
== Statistics ==
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* In fiscal year 2023, federal courts sentenced approximately 1,100 defendants for bank fraud offenses
* In fiscal year 2023, federal courts sentenced approximately 1,100 defendants for bank fraud offenses
* The median sentence for bank fraud was 24 months imprisonment
* The median sentence for bank fraud was 24 months imprisonment
* Approximately 85% of bank fraud defendants received some term of imprisonment
* About 85% of bank fraud defendants received some term of imprisonment
* Average loss amounts in bank fraud cases exceeded $500,000
* Average loss amounts in bank fraud cases exceeded $500,000
* PPP and EIDL fraud cases constituted a significant portion of bank fraud prosecutions in recent years<ref name="ussc-stats">United States Sentencing Commission, 2023 Annual Report and Sourcebook of Federal Sentencing Statistics.</ref>
* PPP and EIDL fraud cases made up a significant portion of bank fraud prosecutions in recent years<ref name="ussc-stats">United States Sentencing Commission, 2023 Annual Report and Sourcebook of Federal Sentencing Statistics.</ref>


== Defenses ==
== Defenses ==
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=== Lack of Intent ===
=== Lack of Intent ===


Bank fraud requires that the defendant knowingly executed a scheme to defraud. Defendants may argue that misrepresentations were made negligently, mistakenly, or without fraudulent intent.
Bank fraud requires that the defendant knowingly executed a scheme to defraud. A defendant might argue that misrepresentations were made negligently, mistakenly, or without fraudulent intent. That's a viable defense.


=== No Misrepresentation ===
=== No Misrepresentation ===


If the defendant's statements were substantially true, even if incomplete or puffery, there may be no actionable misrepresentation.
If the defendant's statements were substantially true, even if incomplete or just puffery, there may be no actionable misrepresentation. Truth matters.


=== No Financial Institution Involved ===
=== No Financial Institution Involved ===


Bank fraud requires that the scheme involve a covered financial institution as defined in 18 U.S.C. § 20. If the victim is not a covered institution, bank fraud charges may be improper (though wire or mail fraud may still apply).
Bank fraud specifically requires that the scheme involve a covered financial institution as defined in 18 U.S.C. § 20. If the victim isn't a covered institution, bank fraud charges may fail. Wire or mail fraud might still apply, though.


=== Materiality ===
=== Materiality ===


The misrepresentation must be material—capable of influencing the institution's decision. Immaterial false statements do not constitute bank fraud.
The misrepresentation must be material. It has to be capable of influencing the institution's decision. Immaterial false statements don't constitute bank fraud.


=== Statute of Limitations ===
=== Statute of Limitations ===


The statute of limitations for bank fraud is 10 years, longer than the 5-year limitations period for many other federal offenses.
The statute of limitations for bank fraud is 10 years. That's longer than the 5-year limitations period for many other federal offenses. This extended period reflects the complexity of financial fraud investigations and how long it takes to detect sophisticated schemes.


== Relationship to Other Offenses ==
== Relationship to Other Offenses ==
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=== Wire Fraud ===
=== Wire Fraud ===


[[Wire Fraud|Wire fraud]] (18 U.S.C. § 1343) often overlaps with bank fraud when electronic communications are used in the scheme. Bank fraud carries higher penalties (30 years vs. 20 years) but does not require proof of wire use.
[[Wire Fraud|Wire fraud]] (18 U.S.C. § 1343) often overlaps with bank fraud when electronic communications are used. Bank fraud carries higher penalties, 30 years versus 20 years. But it doesn't require proof of wire use.


=== Mail Fraud ===
=== Mail Fraud ===
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=== Money Laundering ===
=== Money Laundering ===


[[Money Laundering|Money laundering]] charges often accompany bank fraud when defendants attempt to conceal or move the proceeds of their scheme.
[[Money Laundering|Money laundering]] charges often accompany bank fraud when defendants attempt to conceal or move the proceeds. It's a natural pairing.


=== Identity Theft ===
=== Identity Theft ===
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== Frequently Asked Questions ==
== Frequently Asked Questions ==
{{FAQSection/Start}}
{{FAQSection/Start}}
{{FAQ|question=What is bank fraud?|answer=Bank fraud is a federal crime under 18 U.S.C. § 1344 that prohibits executing schemes to defraud federally insured financial institutions or obtain their property through false pretenses. It carries a maximum sentence of 30 years—higher than wire or mail fraud.}}
{{FAQ|question=What is bank fraud?|answer=Bank fraud is a federal crime under 18 U.S.C. § 1344. It prohibits executing schemes to defraud federally insured financial institutions or obtaining their property through false pretenses. It carries a maximum sentence of 30 years, higher than wire or mail fraud.}}
{{FAQ|question=What is the maximum sentence for bank fraud?|answer=Bank fraud carries a maximum sentence of 30 years in federal prison and fines up to $1,000,000. This is significantly higher than the 20-year maximum for wire and mail fraud, reflecting Congress's intent to protect the federal banking system.}}
{{FAQ|question=What is the maximum sentence for bank fraud?|answer=Bank fraud carries a maximum sentence of 30 years in federal prison and fines up to $1,000,000. That's significantly higher than the 20-year maximum for wire and mail fraud, reflecting Congress's intent to protect the federal banking system.}}
{{FAQ|question=What is the difference between bank fraud and wire fraud?|answer=Bank fraud specifically targets schemes against federally insured financial institutions and does not require use of any particular communication medium. Wire fraud covers schemes using electronic communications against any victim. Bank fraud carries a 30-year maximum sentence; wire fraud carries 20 years.}}
{{FAQ|question=What is the difference between bank fraud and wire fraud?|answer=Bank fraud specifically targets schemes against federally insured financial institutions and doesn't require use of any particular communication medium. Wire fraud covers schemes using electronic communications against any victim. Bank fraud carries a 30-year maximum sentence; wire fraud carries 20 years.}}
{{FAQ|question=What qualifies as a financial institution under the bank fraud statute?|answer=The statute covers FDIC-insured banks, Federal Reserve member banks, federal credit unions, federally licensed foreign bank branches, federal home loan banks, federal savings and loan associations, mortgage lending businesses, farm credit institutions, and similar federally regulated entities.}}
{{FAQ|question=What qualifies as a financial institution under the bank fraud statute?|answer=The statute covers FDIC-insured banks, Federal Reserve member banks, federal credit unions, federally licensed foreign bank branches, federal home loan banks, federal savings and loan associations, mortgage lending businesses, farm credit institutions, and similar federally regulated entities.}}
{{FAQ|question=What is check kiting?|answer=Check kiting is a bank fraud scheme that exploits the float time between depositing a check and its clearance. The scheme involves writing checks between multiple accounts before funds are available, creating the false appearance of sufficient funds, then withdrawing money before the scheme collapses.}}
{{FAQ|question=What is check kiting?|answer=Check kiting is a bank fraud scheme that exploits the float time between depositing a check and its clearance. The scheme involves writing checks between multiple accounts before funds are available, creating the false appearance of sufficient funds, then withdrawing money before the scheme collapses.}}

Latest revision as of 16:57, 23 April 2026

Bank Fraud
Statute:18 U.S.C. § 1344
U.S. Code:Title 18, Chapter 63
Max Prison:30 years
Max Fine:$1,000,000
Guidelines:USSG §2B1.1
Base Level:7
Agencies:FBI, OCC, FDIC, Federal Reserve
Related:Wire Fraud, Mail Fraud, Money Laundering

Bank fraud is a federal crime under 18 U.S.C. § 1344. It prohibits schemes to defraud federally chartered or insured financial institutions. The law also covers attempts to obtain money, funds, credits, assets, securities, or other property owned by or under the custody or control of such institutions by means of false or fraudulent pretenses, representations, or promises.[1]

The penalties are severe. Bank fraud carries a maximum sentence of 30 years in prison, which is significantly higher than the 20-year maximum for wire and mail fraud. Congress made this choice deliberately, signaling its commitment to stronger protection for the federal banking system. On top of that, defendants face fines up to $1,000,000.[1]

Elements of the Offense

Section 1344 actually creates two separate offenses. Either one can support a conviction.

Section 1344(1) - Scheme to Defraud

To convict under § 1344(1), the government must prove:

  1. Scheme to Defraud: The defendant knowingly executed or attempted to execute a scheme or artifice to defraud a financial institution
  2. Material Misrepresentation: The scheme involved material misrepresentations or omissions[2]

Section 1344(2) - Obtaining Property by False Pretenses

Under § 1344(2), the government must establish three things:

  1. Scheme to Obtain Property: The defendant knowingly executed or attempted to execute a scheme to obtain money, funds, credits, assets, securities, or other property
  2. Owned or Controlled by Financial Institution: The property was owned by or under the custody or control of a financial institution
  3. False Pretenses: The scheme used false or fraudulent pretenses, representations, or promises[2]

Financial Institution

What counts as a "financial institution"? The statute defines this in 18 U.S.C. § 20. It includes:

  • Banks insured by the FDIC
  • Federal Reserve member banks
  • Federal credit unions
  • Federally licensed branches of foreign banks
  • Federal home loan banks
  • Federal savings and loan associations
  • Mortgage lending businesses
  • Federal land banks
  • Farm credit institutions[3]

No Wire or Mail Required

Here's a key difference from other fraud statutes. Bank fraud doesn't require proof that the defendant used any particular instrumentality like wires or mail. The offense is complete once the defendant executes or attempts to execute the fraudulent scheme against a covered financial institution. That's it.

Statutory Penalties

Offense Maximum Imprisonment Maximum Fine
Bank fraud (§ 1344) 30 years $1,000,000
Conspiracy to commit bank fraud (§ 1349) 30 years $1,000,000

Congress deliberately set the maximum sentence for bank fraud at 30 years, well above the 20-year cap for wire and mail fraud. This reflects a clear intent to protect federal financial institutions with enhanced punishment.

Beyond prison time and fines, defendants also face:

  • Restitution to the defrauded institution
  • Forfeiture of proceeds
  • Civil money penalties from banking regulators
  • Industry bars that prevent future employment in banking[1]

Federal Sentencing Guidelines

Bank fraud is sentenced under USSG §2B1.1. The same guideline covers wire fraud, mail fraud, and other theft and fraud offenses.

Base Offense Level

The starting point under §2B1.1(a) is:

  • 7 if the offense involved fraud or deceit
  • 6 if it didn't[4]

Loss Amount Enhancements

The amount of loss is usually the biggest factor. The loss enhancement table under §2B1.1(b)(1) applies:

Loss Amount Level Increase
More than $6,500 +2
More than $15,000 +4
More than $40,000 +6
More than $95,000 +8
More than $150,000 +10
More than $250,000 +12
More than $550,000 +14
More than $1,500,000 +16
More than $3,500,000 +18
More than $9,500,000 +20
More than $25,000,000 +22
More than $65,000,000 +24

Bank Fraud-Specific Enhancements

Certain enhancements apply specifically to bank fraud:

  • +2 levels: If the defendant was an officer or employee of a financial institution and the offense involved abuse of the defendant's position
  • +4 levels: If the offense substantially jeopardized the safety and soundness of a financial institution
  • +2 levels: If the offense involved sophisticated means[4]

Common Bank Fraud Schemes

Check Kiting

Check kiting is surprisingly simple. It exploits the float time between when you deposit a check and when it clears. Here's how it works:

  • Open accounts at two or more banks
  • Write checks between accounts before funds are available
  • Create the appearance of sufficient funds during the float period
  • Withdraw money before everything collapses

When the scheme inevitably fails, the banks discover insufficient funds and suffer losses.[5]

Loan Fraud

Loan fraud happens when someone obtains a loan through false statements. Common tactics include:

  • Misrepresenting income, assets, or employment on loan applications
  • Providing false financial statements
  • Submitting fraudulent collateral documentation
  • Using identity theft to obtain loans in others' names

Mortgage lending and SBA loans are particularly vulnerable to this kind of fraud.[5]

Credit Card Fraud

Banks face multiple types of credit card fraud schemes:

  • Application fraud (using false information to obtain cards)
  • Account takeover (gaining unauthorized access to existing accounts)
  • Bust-out schemes (building credit then maximizing charges before disappearing)
  • Merchant fraud (processing fictitious transactions)

Mortgage Fraud

Mortgage fraud is a subset of bank fraud that focuses specifically on misrepresentations in mortgage transactions:

  • Property flipping with inflated appraisals
  • Straw buyers (using someone else's identity or credit)
  • Fraudulent income documentation
  • Multiple loan applications for the same property
  • Builder bailout schemes

PPP and EIDL Fraud

The COVID-19 pandemic created a massive fraud opportunity. Federal prosecutors brought thousands of bank fraud cases related to the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL). Schemes included:

  • Fabricated businesses
  • Inflated payroll figures
  • Multiple applications under different identities
  • Use of funds for unauthorized purposes[6]

Identity Theft-Based Fraud

Stolen personal information enables many fraud schemes:

  • Open fraudulent accounts
  • Obtain loans
  • Access existing accounts
  • Conduct unauthorized transactions

Notable Cases

Todd and Julie Chrisley (2022)

Reality TV stars Todd Chrisley and Julie Chrisley were convicted of bank fraud and tax evasion in 2022. They defrauded banks of over $30 million by providing false financial statements and tax returns to obtain loans. Todd received 12 years in federal prison. Julie got 7 years.[7]

Paul Manafort (2018)

Paul Manafort faced bank fraud charges related to obtaining over $20 million in loans through false representations. He submitted doctored financial statements and fraudulent tax returns to lenders. His sentence was 7.5 years in federal prison on tax and bank fraud charges.[8]

Ippei Mizuhara (2024)

Ippei Mizuhara was the interpreter for Los Angeles Dodgers star Shohei Ohtani. In 2024, he pleaded guilty to bank fraud and tax charges. He'd stolen approximately $17 million from Ohtani to cover gambling debts. Mizuhara made fraudulent wire transfers from Ohtani's bank accounts, lying to bank employees about his authorization.[9]

Allen Stanford (2012)

Allen Stanford ran a $7 billion Ponzi scheme that shocked the financial world. He sold fraudulent certificates of deposit through his Stanford International Bank in Antigua, promising impossibly high returns. The court sentenced him to 110 years in federal prison.[10]

PPP Fraud Cases (2020-Present)

Thousands of people have been prosecuted for PPP loan fraud since 2020. Some notable examples:

  • A Florida man who received $3.9 million in PPP loans and bought a Lamborghini. Sentenced to over 6 years.
  • An Atlanta pastor who obtained $1.5 million in PPP funds for fake businesses.
  • A California man who got over $9 million in PPP loans using fabricated documents.[6]

Statistics

According to the United States Sentencing Commission:

  • In fiscal year 2023, federal courts sentenced approximately 1,100 defendants for bank fraud offenses
  • The median sentence for bank fraud was 24 months imprisonment
  • About 85% of bank fraud defendants received some term of imprisonment
  • Average loss amounts in bank fraud cases exceeded $500,000
  • PPP and EIDL fraud cases made up a significant portion of bank fraud prosecutions in recent years[11]

Defenses

Lack of Intent

Bank fraud requires that the defendant knowingly executed a scheme to defraud. A defendant might argue that misrepresentations were made negligently, mistakenly, or without fraudulent intent. That's a viable defense.

No Misrepresentation

If the defendant's statements were substantially true, even if incomplete or just puffery, there may be no actionable misrepresentation. Truth matters.

No Financial Institution Involved

Bank fraud specifically requires that the scheme involve a covered financial institution as defined in 18 U.S.C. § 20. If the victim isn't a covered institution, bank fraud charges may fail. Wire or mail fraud might still apply, though.

Materiality

The misrepresentation must be material. It has to be capable of influencing the institution's decision. Immaterial false statements don't constitute bank fraud.

Statute of Limitations

The statute of limitations for bank fraud is 10 years. That's longer than the 5-year limitations period for many other federal offenses. This extended period reflects the complexity of financial fraud investigations and how long it takes to detect sophisticated schemes.

Relationship to Other Offenses

Wire Fraud

Wire fraud (18 U.S.C. § 1343) often overlaps with bank fraud when electronic communications are used. Bank fraud carries higher penalties, 30 years versus 20 years. But it doesn't require proof of wire use.

Mail Fraud

Mail fraud (18 U.S.C. § 1341) may apply when the mails are used in bank fraud schemes. Like wire fraud, it carries a lower maximum sentence than bank fraud.

Money Laundering

Money laundering charges often accompany bank fraud when defendants attempt to conceal or move the proceeds. It's a natural pairing.

Identity Theft

Aggravated identity theft (18 U.S.C. § 1028A) adds a mandatory consecutive 2-year sentence when identity theft is used to commit bank fraud.

See also

Frequently Asked Questions

Q: What is bank fraud?

Bank fraud is a federal crime under 18 U.S.C. § 1344. It prohibits executing schemes to defraud federally insured financial institutions or obtaining their property through false pretenses. It carries a maximum sentence of 30 years, higher than wire or mail fraud.


Q: What is the maximum sentence for bank fraud?

Bank fraud carries a maximum sentence of 30 years in federal prison and fines up to $1,000,000. That's significantly higher than the 20-year maximum for wire and mail fraud, reflecting Congress's intent to protect the federal banking system.


Q: What is the difference between bank fraud and wire fraud?

Bank fraud specifically targets schemes against federally insured financial institutions and doesn't require use of any particular communication medium. Wire fraud covers schemes using electronic communications against any victim. Bank fraud carries a 30-year maximum sentence; wire fraud carries 20 years.


Q: What qualifies as a financial institution under the bank fraud statute?

The statute covers FDIC-insured banks, Federal Reserve member banks, federal credit unions, federally licensed foreign bank branches, federal home loan banks, federal savings and loan associations, mortgage lending businesses, farm credit institutions, and similar federally regulated entities.


Q: What is check kiting?

Check kiting is a bank fraud scheme that exploits the float time between depositing a check and its clearance. The scheme involves writing checks between multiple accounts before funds are available, creating the false appearance of sufficient funds, then withdrawing money before the scheme collapses.


Q: What is the statute of limitations for bank fraud?

The statute of limitations for bank fraud is 10 years, longer than the 5-year limitations period for many other federal offenses. This extended period reflects the complexity of financial fraud investigations and the difficulty in detecting sophisticated schemes.


References

  1. ↑ 1.0 1.1 1.2 18 U.S.C. § 1344.
  2. ↑ 2.0 2.1 U.S. Department of Justice, Criminal Resource Manual § 953, "18 U.S.C. § 1344—Elements of Bank Fraud."
  3. ↑ 18 U.S.C. § 20.
  4. ↑ 4.0 4.1 United States Sentencing Commission, USSG §2B1.1 (2024).
  5. ↑ 5.0 5.1 FBI, "Financial Institution Fraud."
  6. ↑ 6.0 6.1 U.S. Department of Justice, "COVID-19 Fraud Enforcement."
  7. ↑ U.S. Department of Justice, "Reality TV Stars Todd and Julie Chrisley Convicted of Federal Charges," June 7, 2022.
  8. ↑ U.S. Department of Justice, "Paul J. Manafort Convicted of Tax and Bank Fraud," August 21, 2018.
  9. ↑ U.S. Department of Justice, "Interpreter for Los Angeles Dodgers Star Shohei Ohtani Charged in Multimillion Dollar Theft," April 11, 2024.
  10. ↑ U.S. Department of Justice, "R. Allen Stanford Convicted of Running $7 Billion Investment Fraud Scheme," March 6, 2012.
  11. ↑ United States Sentencing Commission, 2023 Annual Report and Sourcebook of Federal Sentencing Statistics.

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