Bank Fraud Defenses

Bank fraud defences run element by element, and § 1344 has one the general fraud statutes do not: the involvement of a financial institution, which the government must establish rather than assume. Beyond that, the contest is over intent, materiality, and in secured lending cases over what the institution actually relied on.

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Absence of Intent to Defraud

The statute requires knowing execution of a scheme, and this is where most bank fraud cases are genuinely decided. Lending transactions involve forms completed by intermediaries, figures supplied by third parties, and documents signed without close reading, and none of that establishes an intent to deceive.

Who prepared the application matters. Where a broker or loan officer completed a form, inserted a figure, or advised that a particular characterisation was acceptable, the applicant’s state of mind is a live question rather than an inference from the document. Whether the applicant reviewed what was ultimately submitted is equally material, because applications are frequently altered after signature.

Good faith is a complete defence. Reliance on a professional, including a broker, accountant, or lawyer, sought in good faith on full disclosure and followed, negates the required intent. In lending cases that defence turns on the file: what the applicant provided, what they were told, and what was submitted in their name.

The Misstatement Was Not Material

A misrepresentation incapable of influencing the decision of a reasonable lender is not material, and this argument has more content in lending cases than in most fraud prosecutions because underwriting is documented.

Where the institution approved on grounds independent of the disputed figure, where its own guidelines did not require verification of the item, or where the loan would have been approved on the accurate figure, materiality is genuinely open. Underwriting notes, exception approvals, and internal correspondence are the evidence, and they sit with the institution rather than with the defendant.

Where a lender disregarded verification it was supposed to perform, that bears on materiality and on loss attribution at sentencing as well.

Appraisal cases deserve separate mention. Where the allegation is that a property was overvalued, the dispute is usually between competing valuation methodologies rather than between honesty and dishonesty. Appraisal involves judgment, comparable selection is contestable, and a valuation that later proved optimistic in a falling market is not evidence of fraud. Establishing that the methodology used was defensible at the time, on the comparables then available, addresses both intent and materiality at once.

No Financial Institution

The entity involved must qualify as a financial institution under the statutory definition. That definition is broad, reaching federally insured banks and credit unions and extending to certain other entities including mortgage lending businesses, but it is not unlimited.

Where the lender was a private investor, a hard money lender, a broker rather than the funding source, a servicer, or a platform, the question is worth examining rather than conceding. Insured status is an element the government must prove, usually by certificate or testimony.

Where the element fails the § 1344 count fails, although wire or mail fraud counts charged in the alternative will generally survive.

Structural and Procedural Defences

The limitations period for bank fraud is longer than for ordinary fraud offences, which reduces how often that argument is available, but the question of when the period began running in a scheme case can still be contested.

Venue depends on where the execution of the scheme occurred and where the institution and the transactions were located. Suppression applies where devices, offices, or records were seized in violation of the Fourth Amendment. The sufficiency of the indictment can be challenged where it fails to specify which prong of § 1344 is charged or fails to allege the elements adequately.

Multiplicity is worth examining where each transaction or draw has been charged as a separate execution of the scheme, since the number of counts can substantially exceed what the conduct warrants.

Where a codefendant has entered a cooperation agreement, the account they will give is worth reconstructing from the debriefing history rather than accepting from a summary. In lending schemes the participants occupied different positions, and a cooperator with a central role has an incentive to describe a peripheral participant as a knowing one. How that account developed across successive interviews, and whether it aligns with the documents, is ordinary defence work in these cases.

Frequently Asked Questions

What is the strongest defence to bank fraud?

It depends on the facts, but in lending cases the intent element and the lender’s own underwriting are usually the most productive. Applications are frequently completed by brokers, altered after signature, or approved on grounds unrelated to the disputed figure, and each of those bears directly on whether the government can prove a knowing scheme to defraud.

The broker filled in the form. Does that matter?

It can be decisive. The statute requires knowing execution of a scheme, so who prepared the application, whether you reviewed the version submitted, and what you were told about the figures all go to intent. Where a form was altered after signature or a figure inserted without your knowledge, the element may not be provable at all.

Can I argue the bank should have caught it?

Not as a complete defence, but the institution’s underwriting is genuinely relevant. Where a lender approved on grounds independent of the disputed item, did not require verification of it, or disregarded checks it was supposed to perform, that bears on materiality and on loss attribution at sentencing. Underwriting notes and exception approvals are the evidence.

What if the lender was not a bank?

Then the financial institution element is in play. The statutory definition is broad and reaches mortgage lending businesses as well as insured depositories, but where the funding source was a private investor, a hard money lender, a broker, a servicer, or a platform, the question is worth examining. Insured status is something the government must establish.

Does the loan performing for years help?

It bears on causation and on loss. Where a loan performed for a period before default, or where default reflected market conditions rather than the alleged misrepresentation, attributing the entire loss to the scheme is contestable. That argument operates mainly at sentencing, where loss drives the Guidelines range.

Why does the indictment have a count for every transaction?

Because each execution of the scheme can support a separate count, so draws, payments, or transactions can each be charged. Multiplicity arguments can sometimes narrow that. The practical effect on exposure is limited, since the Guidelines range is driven by loss rather than count numbers, but the structure still shapes how an indictment reads to a jury.

Working With Law Offices Of SRIS, P.C.

The most valuable material in a bank fraud defence usually sits with the institution rather than the client: underwriting notes, exception approvals, internal correspondence, and the complete loan file. Obtaining it, rather than working from what the government chose to produce, is where these cases turn.

Mr. Sris, Owner and Founder of Law Offices Of SRIS, P.C., is a former prosecutor and is admitted in Virginia, Maryland, the District of Columbia, New Jersey, and New York. The firm has been practicing since 1997. Mr. Sris and the firm’s Of Counsel attorneys handle criminal defense matters across those jurisdictions, which matters in federal practice because a single investigation frequently reaches conduct, witnesses, and records in more than one state. Mr. Sris brings a background in accounting and information systems from George Mason University, applied to complex financial and technology-related cases.

The firm serves Northern Virginia from 1655 Fort Myer Dr, Suite 700, Room 719, Arlington, VA 22209 and central Virginia from 7400 Beaufont Springs Drive, Suite 300, Room 395, Richmond, VA 23225. By appointment. Call (888) 437-7747 to schedule. Request a consultation. Reach our location at (888) 437-7747.

This page provides general information about defences to federal bank fraud charges and does not create an attorney-client relationship. Case results depend on a variety of factors unique to each case. Results may vary.

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These defences apply to one offence. Our page on bank fraud charges sets out that offence from start to finish.