Articles & Books
Up With Changes in Bank Fraud Statutes
By Joel M. Androphy
On August 9, 1989, President Bush signed into law the Financial Institutions Reform Recovery, and Enforcement Act (the "Act"). Major changes have been made in both criminal and civil enforcement. This column will highlight several important provisions.
1. Statute of Limitations
The statute of limitations has been extended from five to 10 years. The Act1 provides a new 10-year statute of limitations2 for a violation of, or a conspiracy to violate, certain bank related offenses.3 The Act4 also applies the new statute of limitations to offenses committed before the effective date of the Act, provided the previously applicable five-year statute of limitations has not expired as of such date.5 So, for example, if your questionable activity occurred four years, 11 months, and 29 days prior to the effective date of the act, your exposure continues for another five years and one day.
2. Civil and Criminal Penalties
The Act6 provides civil penalties for violations of banking related offenses.7 Generally, the maximum civil penalty may not exceed $1 million, except in the case of a continuing violation, or a pecuniary gain or loss in excess of the dollar limits. The maximum term of fine and maximum term of imprisonment for a violation of the numerous bank related offenses statues were increased, depending on the specific statute, from $5,000 and $10,000 to $1 million and from two and five years to 20 years.8
3. Obstruction of Justice
A new obstruction of justice provision9 makes it an offense for an officer10 of a financial institution to disclose information about the existence or contents of a subpoena served on a financial institution. In general, the penalty increases from one year to five years if there is an intent to obstruct a judicial proceeding.
4. RICO Amendment
Bank fraud11 has been added to the list of crimes that comprise prohibited activities under the Racketeer Influenced and Corrupt Organizations Act.12 An intimidating weapon of enforcement solely designed to extract pleas of guilty.
5. Use of Grand Jury Information
The Act13 also provides an attorney for the government with the authority to disclose grand jury information to another attorney for the government for use in enforcing the civil penalty and civil forfeiture provisions of the Act.14 There is also a provision permitting, upon motion of an attorney for the government, disclosure to identified personnel of a financial institution regulatory agency.
6. Protection for Whistleblowers and Rewards
The Act15 provides a civil remedy only to informants who are not participants in the alleged violation of the law. The Act16 authorizes rewards to encourage individuals to provide information leading to recoveries exceeding $50,000 in fines, restitution, forfeiture, or civil penalties.
7. Criminal and Civil Forfeiture
The Act17 makes subject to forfeiture to the United States any property, real or personal, which constitutes or is derived from proceeds traceable to a violation of the banking related statutes18. The Act19 provides for the criminal forfeiture of any property constituting or derived from the proceeds that the person obtained, directly or indirectly, as a result of the banking violations.
Those who had marked five years in their calendar as the anniversary date of their questionable banking activity can count an additional five years before celebrating.
As for the drastic penalty provisions of the Act, most violators will not forfeit property or pay astronomical fines. Generally, they are already liquidating their property in the bankruptcy courts. This measure as it concerns forfeitures and fines is merely a political provision with little practical benefits to the banking industry.
- Subsection 961(1)(1).
- 18 U.S.C. § 3293.
- 18 U.S.C. §§ 215, 656, 657, 1005, 1006, 1007, 1008, 1014, or 1344; or §§ 1341 or 1343, if the offense affects a financial institution.
- Subsection 961(1)(3).
- This apparently does not violate the Ex Post Facto Clause, U.S. Const. Art I, § 9, cl.3 Holland v. District Ct., Douglas, Colorado, et al, 831F2d 940, cert. denied, 108 S. Ct. 127 (1987).
- Section 951.
- See supra note 3.
- Subsection 961(a)-(h), (k).
- Subsection 962(c) added a new Obstruction of Justice provision to § 1510 of the Title 18 of the U.S.C.
- The term an officer of a financial institution means an officer, director, partner, employee, agent, or attorney of or for a financial institution.
- 18 U.S.C. 1344.
- 18 U.S.C. § 1961 (1).
- Subsection 964(a) of the Act added a new § 3322 to title 18 of the U.S.C.
- See 18 U.S.C. § 951 and § 981 (a)(1)(C).
- Section 932.
- Section 933.
- Subsection 963(a) of the Act amended 18 U.S.C. § 981(a)(1) by adding a new subparagraph "(C)".
- See supra note 3.
- Section 982 of Title 18 of the U.S.C.n
Joel Androphy, partner in Berg & Androphy, is a certified criminal law specialist. He is editor of The Houston Lawyer.
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