Financial Institution Fraud

The bank fraud statute is potentially just as broad as the mail and wire fraud statutes, but for some reason, plaintiffs often fail to include bank fraud as a predicate act in a RICO claim. The bank fraud statute states:

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 for not more than 30 years, or both.

18 U.S.C. § 1344 (emphasis added). Bank fraud is probably not a common predicate act because people read the first subsection and believe the fraud must be against a financial institution and fail to read the second subsection’s language concerning funds “under the custody or control of” a bank. Under § 1344(2), bank fraud potentially arises even if the victim is not a bank and even if the bank did not lose any of its own property pursuant to a scheme to defraud. Bank fraud arguably occurs whenever a scheme to defraud enables the perpetrator to obtain any funds “under the custody or control of” a bank. Thus, if a scheme to defraud results in elderly victims mailing checks to the perpetrator, which are then cashed and the proceeds pocketed by the perpetrator, the perpetrator has arguably engaged in bank fraud. If a scheme to defraud results in “sweepstakes winners” departing with their credit card numbers, which are then used by the perpetrator to acquire goods and services for himself, the perpetrator has arguably engaged in bank fraud. In short, the bank fraud statute is arguably violated whenever a scheme to defraud results in the victim authorizing a bank to release funds to the perpetrator. Bank fraud is a predicate act that should not be overlooked.

An allegation of bank fraud should also be considered whenever the defendant has forged checks or endorsements on checks.

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