Federal Bank Fraud Penalties in New York City
Bank fraud is a serious white collar crime that involves deceiving a bank or financial institution. In New York City, both federal and state laws can apply to bank fraud cases. This article will focus on the penalties for federal bank fraud in New York City.
What is Federal Bank Fraud?
The federal bank fraud statute, 18 U.S.C. § 1344, makes it a crime to knowingly execute or attempt to execute a scheme to defraud a financial institution or obtain money under its control through false or fraudulent pretenses. There are two main ways bank fraud can occur:
- Scheme to defraud a financial institution – This involves having an intentional plan to deceive or cheat a bank out of money or property.
- Scheme to obtain bank property through false pretenses – This involves making material misrepresentations to a bank in order to get money or assets from the bank.
To be convicted, the government must prove there was an actual scheme devised, it was executed knowingly and willfully by the defendant, and it involved a material deception.
Some examples of bank fraud include:
- Check kiting schemes
- Submitting false financial statements to obtain a loan
- Using stolen identities or account information to take funds from accounts
- Embezzling from bank accounts as an employee
- Mortgage fraud through false loan applications
Federal Jurisdiction Over Bank Fraud
For a bank fraud case to fall under federal jurisdiction, the financial institution involved must be federally insured or chartered. This includes most major banks and credit unions.
Federal jurisdiction can also apply if the fraudulent scheme uses interstate communications like wire transfers across state lines. Many bank fraud schemes involve transactions across multiple states, bringing it under federal law.
The FBI and U.S. Attorney’s Offices usually handle federal bank fraud investigations and prosecutions in New York City. The Manhattan U.S. Attorney’s Office has a specific Complex Frauds and Cybercrime Unit that prosecutes many financial crimes.
Penalties for Federal Bank Fraud
Conviction for federal bank fraud carries severe penalties, including:
- Up to 30 years in federal prison – The maximum prison sentence under the bank fraud statute is 30 years, however sentences are typically much lower than the statutory maximum based on federal sentencing guidelines.
- Fines up to $1 million – The maximum allowable fine for an individual is $1 million. The fine imposed is based on the severity of the offense and the amount of the loss.
- Restitution – The defendant will likely be ordered to pay back all losses to the financial institution from their fraudulent scheme. The court may order restitution even if not all counts of conviction require it.
- Forfeiture – The government can seize any property derived from proceeds of the fraud or used to facilitate the crime. The defendant will have to forfeit these assets.
- Probation – For lesser offenses where prison time is not imposed, the defendant may serve a term of probation following release. Probation can involve restrictions on finances and monitoring.
- Loss of professional licenses – Conviction may result in loss of licenses needed for certain careers in finance, real estate, healthcare, law, etc.
Federal Sentencing Process
Federal sentences for bank fraud are determined based on the United States Sentencing Guidelines. While these guidelines are advisory, judges must consider them when imposing a sentence. Here are some key factors:
- Loss amount – The amount of loss caused by the fraud scheme is the primary factor. Larger loss amounts result in longer recommended sentences. The guidelines have an extensive loss table.
- Sophistication – Crimes involving more complex schemes and planning lead to longer sentences.
- Role of the defendant – Those who were organizers, leaders or managers of criminal activity receive sentencing enhancements for their role.
- Prior criminal history – Defendants with a more serious criminal background are given longer sentences.
- Acceptance of responsibility – Pleading guilty early and accepting responsibility may earn a defendant a sentencing reduction.
The probation department will conduct an investigation and recommend a sentencing guideline range to the judge. Both the prosecution and defense have the opportunity to argue for increases or decreases to this recommended range.
In some cases, judges may make an “upward departure” from the guidelines and impose a harsher sentence if the crime was unusually sophisticated or caused massive losses.
Common Defenses to Federal Bank Fraud Charges
While bank fraud penalties can be severe, experienced criminal defense attorneys can sometimes get charges reduced or dismissed by raising effective legal defenses. Some common defenses include:
- Lack of intent – Since bank fraud requires intent to deceive, defendants may claim they did not deliberately try to defraud the bank. This could apply to cases of mistaken identity or accidental reporting errors.
- No scheme existed – The defense may argue there was no actual scheme devised to defraud the bank, and the transactions were legitimate.
- Not material – If any misrepresentations made were minor and would not have impacted the bank’s actions, they may not meet the federal standard for “materiality.”
- Statute of limitations – For federal crimes, bank fraud charges must be brought within 10 years of the offense.
- Entrapment – It may be possible to argue that law enforcement induced the defendant to commit bank fraud through coercive encouragement.
- Duress – Defendants can claim they were forced to commit the fraudulent acts under threats of harm.