Fraud against the Federal Deposit Insurance Corporation is a serious federal crime, often committed in conjunction with other federal crimes, that can frequently result in large fines and substantial jail sentences.
The Federal Deposit Insurance Corporation was established by President Franklin Roosevelt and Congress in 1933 as a response to the bank failures that had proliferated across the United States during the Great Depression.
A government-sponsored enterprise, the FDIC insures bank depositors against bank failure for deposits up to $250,000, a limit that was last increased in 2008. However, FDIC insurance can be utilized on up to six types of accounts at a single financial institution, so individuals can ultimately claim up to $1,500,000 from the entity.
In addition to its role insuring bank deposits, the FDIC also offers guarantees on interbank loans. This function, known as the Temporary Liquidity Guarantee Program, allows banks to access each other’s funds to make loans and repay deposits during brief shortages in liquidity.
The Federal Deposit Insurance Corporation serves as more than simply a guarantor of loans, however. Under its federal mandate, it is also a bank examiner with broad powers to oversee banks throughout the United States. One of the most important regulatory roles is to take over banks that have become insolvent and to “resolve” them.
To prevent financial institutions from becoming insolvent and therefore in need of resolution, the FDIC requires them to adhere to strict capital and liquidity requirements. Banks must submit detailed paperwork explaining their financial position and bank examiners hired by the FDIC frequently examine bank’s corporate records to ensure that they are well capitalized.
Fraud against the Federal Deposit Insurance Corporation can unfold in many ways. Most importantly, cases that implicate an individual in fraud against the FDIC often involve other federal crimes that the Federal Bureau of Investigation and the United States Department of Justice will also vigorously pursue.
FDIC fraud cases usually involve a few scenarios. One of the most common is when bank insiders intentionally take illegal actions that lead to a bank failure. This can include violating other banking laws that, through their cumulative effect, result in a bank becoming insolvent.
It can also occur when bank employees, typically executives, seek federal insurance funds for loans that they did not actually make. In some of these schemes, bankers have created fake loans entirely, solely so they can receive federal funds to which they are not entitled.
The other common types of fraud against the FDIC involve false statements made to the corporation and its staff during the two phases of its work. In some cases, prosecutions have resulted from false information that is provided to the FDIC’s examiners and auditors about a bank’s condition. Because this information is essential to the way the FDIC allows banks to operate, false statements are punishable by stiff sentences.
When a bank is being resolved, bankers can also be charged with federal crimes if they make false statements to the FDIC and its staff about insurance claims. This is to prevent bankers from making statements that allow themselves or other scammers to receive federal insurance payments to which they are not entitled.
A final type of FDIC fraud can occur when banks or other financial institutions falsely advertise that they are insured by the corporation. Because this deceives consumers, it is a federal offense.
Penalties for fraud against the FDIC, and related federal crimes like mail and wire fraud, bank bribery, and perjury are severe. Jail sentences for each count can be up to 30 years imprisonment and fines and restitution frequently reach into the millions of dollars. In addition, the number of prosecutions for white collar financial crimes has dramatically increased since the financial crisis.
If you or a loved one is being investigated or facing charges for fraud against the Federal Deposit Insurance Corporation, you should contact an experienced criminal attorney immediately. Because of the complexity of federal financial laws, a lawyer with experience in criminal cases involving banking regulation in essential.
An experienced attorney can help you safeguard your legal rights during an investigation, decide whether to strike a plea deal with prosecutors, and – if necessary – present your defense to a judge and jury.
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