White Collar Crimes in Banking

by Kelly Kovacic on January 26, 2013

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Banks are a common target for white-collar criminals. Many criminals defraud banks with false identification, false checks, fabricated or altered money orders, and stolen financial information. To mitigate these losses, banks have a myriad of authentication systems in place to thwart the efforts of an outside criminal. Unfortunately, when an insider is involved, avoiding a loss can be nearly impossible. Common types of criminal employee misconduct include various types of fraud, embezzlement, and identity theft.


Fraud occurs where one makes a material misrepresentation of fact in order to achieve a financial gain. A fraudulent scheme aimed at a financial institution by one of its agents can take a number of forms at a number of levels. Crooked loan officers can approve fraudulent applications by false companies that they have set up. Low-level employees may obtain checks with customer data and commit check fraud by writing checks on customer accounts. Even corporate officers may misrepresent the institution’s financial position or backdate transactions.

However, there are occasions when an employee may be used to provide information that is used to defraud a bank without their knowledge. In such a case, it is important to retain an experienced lawyer to defend you. According to Steven Kellis, Attorney at Law, “My previous job as a Senior Assistant District Attorney has given me the experience necessary to be a very successful criminal defense attorney”.

Defrauding a financial institution can have severe penalties. Under 18 U.S.C. § 1341-1343, a single count of mail fraud or wire fraud may result in 20 years imprisonment and a fine. If the target is a financial institution, the term of imprisonment may increase to 30 years and result in a fine of $1,000,000. Under 18 U.S.C. § 1344, it is a federal offense to defraud any financial institution. These laws apply in addition to any state penalties associated with check fraud, misrepresentation, theft, or larceny.


Embezzlement is the taking of property entrusted to one’s care that is owned by someone else. Customers entrust the bank to keep money secure; they do not expect the bank or its agents to appropriate it for their own ends. Embezzlement at a bank can have many different forms. At the most basic level, a teller may embezzle funds by stuffing currency from his or her station into his or her pockets while no one is looking. With the proliferation of high-definition video cameras, electronic transaction records, and physical counts at the end of one’s shift, this type of embezzlement is largely outdated.

More advanced forms of embezzlement still occur, however. Employees can transfer money between customer accounts and into accounts owned by the employee and registered under false names. Even corporate officers or directors misappropriate corporate funds for their own purposes. This is easily traceable, but it does not prevent anyone from trying it. In a business that deals with constant transfers of money in and out of various accounts, some people cannot resist the temptation to siphon off a bit of the money.

Embezzling money from a financial institution is a federal offense. Under 18 U.S.C. § 656, any employee at any number of financial institutions including banks insured by the Federal Deposit Insurance Corporation who embezzles funds from the bank may be punished by up to 30 years in prison and a fine of up to $1,000,000. That section contains a provision that if the embezzled amount is less than $1,000, the defendant may be imprisoned for only one year. Even if the amount is minor and the sentence is lenient, having a felony record for embezzlement will almost certainly preclude any future employment opportunities in the financial sector.

Identity Theft

Identity theft can be a problem at a bank. Banks require large numbers of lower-level employees in order to operate. While banks perform background checks and due diligence on applicants before hiring anyone, a few malicious employees can slip through the cracks. Applications for small business loans or mortgages entail large quantities of personal information including names, addresses, birth dates, account numbers, social security numbers, incomes, and mothers’ maiden names. Banks only approve a small percentage of business loans; even a small bank will have a large number of reasonably current loan applications at any given time.

A corrupt loan officer at a bank can copy and resell this information on the black market. This type of crime is relatively rare, but it does happen. Unlike many different types of white-collar crime, this type is easily traceable. Investigators that handle identity theft cases look for common threads between the victims; if a large pool of customer data is compromised, investigators and customers have an interest in identifying the source. Since only so many individuals have direct access to this type of customer information, the names and number of customers will invariably lead investigators to the person who handled that information.

As with fraud and embezzlement, states have laws prohibiting identity theft or the possession of certain types of information if the individual has the intent to defraud the customer. State statutes vary, but identity theft and possession of financial information usually constitutes a low-grade felony punishable by one year or a few years in prison. Federal punishments for identity theft are much greater; under 18 U.S.C. § 1028, anyone who knowingly transfers any “means of identification” that they should have known was stolen may be imprisoned for up to 15 years per count. Within the confines of that statute, “means of identification” includes information used to specify individuals including social security numbers, names, birth dates, and other commonly sold information.

In addition to the aforementioned offenses, employees of financial institutions who tend toward crime can provide a variety of financial services to other individuals. These services include altered credit reports and a false financial history. This can result in the extension of a large line of credit to a customer who is not qualified for it or a customer who is simply fictitious. Malicious employees can compromise company servers and leak or delete sensitive depositor information even without a profit motive. Banks employ a variety of internal security measures to prevent employee theft, but many systems are reactive tracking systems that cannot prevent crimes. As long as someone has access to money or valuable information, there will always be someone willing to steal it.

Kelly Kovacic is a paralegal who writes this article to bring awareness to the rise of many white collar crimes in the banking industry today. Steven Kellis, Attorney at Law, can provide professional help and turn around the lives of those accused of white collar crimes, whether caused by their negligence or the fault of another.

Kelly Kovacic

Kelly Kovacic

Kelly Kovacic is a paralegal who contributes articles for the legal community.
Kelly Kovacic

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