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).

Under the plain language of the statute, 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.

Courts, however, have been reluctant to adopt such a broad interpretation of the bank fraud statute.  As explained in H & Q Prop., Inc. v. Doll, 793 F.3d 852 (8th Cir. 2015), “the purpose of the bank fraud statute is not to protect people who write checks to con artists but to protect the federal government’s interest as an insurer of financial institutions…  The mere use of a bank’s traditional customer services does not per se transform [a defendant’s] alleged misconduct into bank fraud; indeed, … [the bank fraud statute] does not federalize frauds that are only tangentially related to the banking system.” Id. at 856 (internal quotation marks and citations omitted).

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