Any illegal act that involves the use of deception to obtain money or other property from a financial institution, or from a bank’s depositors, is often categorized as bank fraud. Like other fraud offenses, bank fraud involves the use of a “scheme or artifice” to obtain something of value. The criminal offense of bank fraud differs from bank robbery because, while they might both involve stealing from a bank, bank fraud does not necessarily involve violence or threats of violence.
Federal law provides a very broad definition of bank fraud. It covers any “scheme or artifice” intended to “defraud a financial institution,” or the use of deceptive means to obtain something of value that a financial institution owns or controls. A conviction under the federal statute can result in up to 30 years in prison, a fine of up to $1 million, or a combination of the two. The term “financial institution” is defined by federal law to include banks and credit unions that are federally insured, such as by the Federal Deposit Insurance Corporation (FDIC), Federal Reserve banks, mortgage lending businesses, and certain other institutions that accept deposits of money and other assets.
State laws vary considerably in how they classify offenses that federal law would consider bank fraud. In New York, for example, a wide range of “fraud” offenses, such as issuing a bad check, could fit within the category.
Bank fraud can target a financial institution or depositors of such an institution. Other offenses, such as money laundering, may make use of a financial institution as part of a broader criminal scheme.
Most bank fraud statutes require the state to prove that a defendant acted “knowingly,” meaning that the defendant was aware that he or she was making false representations for the purpose of obtaining something of value. For example, someone who presents a fraudulent check to a bank while believing it to be genuine, perhaps after receiving it from someone who did intend to commit fraud, should not be guilty of bank fraud.
Some of the most common forms of bank fraud involve fraudulent use of checks to obtain cash or other assets. In a situation known as check kiting, many banks will allow people to “cash” checks by presenting a check made out to that person, or to the bank. The bank gives the person money from the cash available on hand, known as “float.” Check kiting involves taking advantage of a bank’s float, such as by writing a check with the knowledge that the account does not have sufficient funds. Another form of bank fraud involves presenting a check for payment that has been altered or modified, or that is an outright forgery.
A type of bank fraud that targets depositors is bank theft. A bank fraud scheme may involve theft of checks from mailboxes, mailrooms in offices, or post offices. Perpetrators may use the information on the checks to commit identity theft by creating checks to draw on the same account or using the information to open new accounts.
Fraud also may arise from uninsured deposits. Banks are required by law to be licensed by the Department of the Treasury and to have insurance through a provider like FDIC. One type of bank fraud involves an unlicensed, uninsured bank soliciting deposits from investors, or even the general public, while purporting to be a fully authorized financial institution.
