Summary
Twenty-Fourth Annual Survey of White Collar Crime
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Extract
Financial institutions fraud.
I. INTRODUCTION II. BANK FRAUD STATUTE A. Purpose and Scope B. Elements of the Offense 1. Knowledge 2. Executes or Attempts to Execute 3. Scheme or Artifice 4. To Defraud or Obtain Monies By False or Fraudulent Pretenses a. Defrauding a Financial Institution b. False or Fraudulent Pretenses 5. Financial Institution C. Defenses 1. Custody or Control 2. Good Faith 3. Multiplicity of the Indictment D. Penalties E. Supplemental Enforcement Mechanisms 1. Suspicious Activity Report 2. Civil Sanctions for Insider Fraud a. Applicable Law in Civil Cases under FIRREA i. Atherton v. FDIC ii. Federal Common Law Post-Atherton: 'No Duty' Rule iii. Federal Common Law Post-Atherton: D'Oench Doctrine b. Double Jeopardy i. The Dual Functions of the FDIC ii. Hudson v. United States III. CRIMINAL PENALTIES UNDER 12 U.S.C. [section] 18180) A. Scope B. Elements C. Penalties IV. THE BANK SECRECY ACT A. Purpose B. Title I: Record-Keeping Requirements 1. Additional Records to Be Retained by Banks 2. Additional Records to Be Retained by Brokers and Dealers in Securities 3. Additional Records to be Retained by Casinos 4. Additional Records to be Retained by Currency Dealers and Exchangers 5. Enforcement and Penalties C. Title II: Reporting Requirements 1. Money Services Businesses 2. Currency Transaction Reports a. Domestic Currency Transactions b. Foreign Currency Transactions c. Transactions with Foreign Financial Agencies 3. International Transportation of Currency and Monetary Instruments Reports a. Elements of the Offense i. Legal Duty to File ii. Knowledge iii. Willful Violation of the Reporting Requirement b. Enforcement and Penalties c. Defenses i. Excessive Fines ii. Double Jeopardy 4. Structuring Transactions to Avoid Reporting Requirements a. Elements b. Enforcement and Penalties c. Defenses I. INTRODUCTION
This article reviews the development and application of three federal criminal statutes that govern offenses by or against financial institutions. Section II analyzes the Bank Fraud Statute ("BFS"), (1) which targets fraud against financial institutions. Section III reviews the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), (2) which regulates the conduct of officers, directors, and third-party fiduciaries who fraudulently managed now-defunct financial institutions. Section IV examines the Bank Secrecy Act ("BSA"), (3) which prohibits deceptive financial transactions designed to evade certain reporting requirements. II. BANK FRAUD STATUTE This Section examines the Bank Fraud Statute, 18 U.S.C. [section] 1344. It addresses the purpose as well as the broad scope of [section] 1344; delineates the five statutory elements of the bank fraud offense; discusses several defenses to a charge of bank fraud; presents the sanctions associated with the statute; and reviews additional enforcement mechanisms. A. Purpose and Scope The purpose of the Bank Fraud Statute, 18 U.S.C. [section] 1344, is to protect the interests of the federal government as an insurer of financial institutions. (4) The driving force behind the legislation was the Supreme Court's decision in Williams v. United States, (5) where the Court held that the crime of making false statements to financial institutions did not encompass check-kiting schemes. (6) Congress passed [section] 1344 in reaction to this ruling primarily to give the government the means to prosecute check-kiting. (7) The BFS also criminalized a variety of other schemes intended to defraud federally insured financial institutions. (8) The BFS covers a variety of offenses against financial institutions, including check-kiting, (9) check forging, (10) false statements and nondisclosures on loan applications, (11) stolen checks, (12) unauthorized use of automated teller machines ("ATMs"), (13) credit card fraud, (14) student loan fraud, (15) bogus transactions between offshore "shell" banks and domestic banks, (16) automobile title frauds, (17) diversion of funds by bank employees, (18) submission of fraudulent credit card receipts, (19) false statements intended to induce check cashing, (20) and mortgage fraud. (21) Thus, [section] 1344, as enhanced by FIRREA (22) and the Crime Control Act of 1990, (23) has become the basic provision for prosecuting bank fraud offenses. Although broadly written, [section] 1344 fails to reach all crimes relating to financial institutions. For example, money laundering, (24) bribery of bank officials, (25) fraud committed by a bank on its customers, (26) and schemes to pass bad checks (27) fall outside of the scope of [section] 1344. Similarly, [section] 1344 does not protect a bank customer against "pigeon drop" schemes, (28) where funds are legally withdrawn from an account by the customer and are no longer under the custody or control of the institution when the fraud occurs. (29) B. Elements of an Offense To obtain a conviction under [section] 1344 the government must show that the defendant: (i) knowingly, (i...See the full content of this document
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