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] 1818(j)
     A. Scope
     B. Elements
     C. Penalties
 IV. Tim 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
     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. The BFS also criminalized a variety of other schemes intended to defraud federally insured financial institutions. (7)

The BFS covers a variety of offenses against financial institutions, including check-kiting, (8) check forging, (9) false statements and nondisclosures on loan applications, (10) stolen checks, (11) unauthorized use of automated teller machines ("ATMs"), (12) credit card fraud, (13) student loan fraud, (14) bogus transactions between offshore "shell" banks and domestic banks, (15) automobile title frauds, (16) diversion of funds by bank employees, (17) submission of fraudulent credit card receipts, (18) and false statements intended to induce check cashing. (19) Thus, [section] 1344, as enhanced by FIRREA (20) and the Crime Control Act of 1990, (21) 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, (22) bribery of bank officials, (23) fraud committed by a bank on its customers, (24) and schemes to pass bad checks (25) fall outside of the scope of [section] 1344. Similarly, [section] 1344 does not protect a bank customer against "pigeon drop" schemes, (26) 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. (27)

B. Elements of an Offense

To obtain a conviction under [section] 1344 the government must show that the defendant: (i) knowingly, (ii) executed or attempted to execute, (iii) a scheme or artifice, (iv) to either (a) defraud, or (b) through false or fraudulent pretenses, representations, or promises, obtain the monies or other property of, (v) a financial institution. (28)

1. Knowledge

The knowledge element of the BFS requires the government to prove that the defendant had the intent to defraud a financial institution. (29) Such intent "cannot be inferred from the mere presence of a defendant at the scene of the crime or association with members of a criminal conspiracy." (30) However, intent can be adduced from the totality of the evidence, (31) including evidence of prior similar acts (32) and other circumstantial evidence. (33) A showing of "reckless indifference" (34) or "willful blindness" (35) to a scheme to defraud can also support an inference of knowledge.

The knowledge element of [section] 1344 does not require the government to prove that the defendant knowingly made direct misrepresentations to the financial institution. (36) Instead, the question turns on what the defendant actually knew about the status of the accounts used. (37) Moreover, if the government proves the defendant had fraudulent intent, it need not demonstrate either that the defendant received a personal benefit or knew that the financial institution would be harmed. (38) Whether the defendant knew the financial institution was federally insured is irrelevant to establishing knowledge. (39) Finally, the defendant need not conceal his actions from bank employees to find intent to defraud. (40)

2. Executes or Attempts to Execute

Under the BFS, the government must prove that the defendant executed or attempted to execute a scheme to defraud a financial institution. (41) If an indictment includes both the "execute" and "attempt to execute" language, a jury must unanimously find the defendant guilty on only one alternative to convict; that is, find that the defendant either executed or attempted to execute a scheme to defraud a financial institution. (42)

Section 1344 does not specifically define "execution." (43) Thus, courts consider the following factors in determining whether a scheme has been executed: (i) the ultimate objective of the scheme, (ii) the nature of the scheme, (iii) the benefits intended, (iv) the interdependence of the acts, and (v) the number of parties involved. (44) Since it is possible to have more than one execution of the same criminal scheme, courts often must determine if separate acts are independent executions or simply acts in furtherance of one execution. (45) An act constitutes a separate execution if it is intended to put the financial institution at a "separate, distinguishable financial risk from the risk it already undertook." (46)

The BFS does not require that the execution or attempted execution be ultimately successful. A person, who knowingly defrauds a financial institution of capital on false pretenses, is violating [section] 1344 even if the money is eventually returned. (47)

3. Scheme or Artifice

Section 1344 further requires a "scheme" or "artifice" to defraud a financial institution. (48) The courts have liberally construed this language to mean "any plan, pattern or [course] of action ... intended to deceive others to obtain something of value." (49)

A representation is material if it has "a natural tendency to influence, or [is] capable of influencing, the decision of the decision-making body to which it was addressed," (50) but it does not need to induce actual reliance. (51) In Neder v. United States, (52) the Supreme Court unanimously held that materiality is an element of a scheme or artifice to defraud under [section] 1344. (53) The Court explicitly stated: "under the rule that Congress intends to incorporate the well-settled meaning of the common-law terms it uses, we cannot infer from the absence of an express reference to materiality that Congress intended to drop that element from the fraud statutes." (54) Therefore, materiality is required under [section] 1344, but reliance is not; the scheme "need not have exerted actual influence, so long as it was intended to do so and had the capacity to do so." (55)

Several circuits require that the defendant expose a financial institution to an actual risk of loss to find the scheme to defraud element. (56) However, other circuits have chosen to consider risk of loss as a relevant, but non-essential, element in the determination of scheme to defraud. (57)

4. To Defraud or Obtain Monies By False or Fraudulent Pretenses

The fourth statutory element, to defraud or obtain monies by false or fraudulent pretenses, comprises two alternative parts. The government may seek a conviction under either [section] 1344(1), implementing a scheme or artifice to defraud, or [section] 1344(2), employing false pretenses or promises to obtain property owned, held, or controlled by a financial institution. (58) An indictment that refers generally to [section] 1344 may refer to either clause. Because the clauses are treated independently, an act may be criminal under [section] 1344 without falling under both prongs. (59)

There are two important distinctions between subsection (1) and (2) in [section] 1344. First, subsection (1) does not require false or fraudulent misrepresentations, which is a requirement under (2). Second, subsection (1) does not require the defendant to deprive the financial institution of monies or property, whereas subsection (2) does. (60) Though subsections (1) and (2) are treated independently in most circuits, at least one court has required that a defendant charged under both subsections in the indictment be found guilty under both subsections to be convicted. (61)

a. Defrauding a Financial Institution

Courts have broadly construed the phrase "a scheme or artifice to defraud" using the mail and wire fraud statutes (62) as a guide. (63) Section 1344(1) requires that the defendant attempt to obtain something of value from the financial institution, though it need not be through false or fraudulent pretenses. (64) Thus, crimes which involve no false representations to a financial institution, such as check-kiting, can be prosecuted under [section] 1344(1). (65) Additionally, [section] 1344(1) encompasses crimes where the scheme defrauds a financial institution of "the intangible right of honest service." (66) The principle of "honest service" developed out of the doctrine that the withholding of "the honest and faithful discharge of ... fiduciary duties can constitute a scheme to defraud" even without the loss of money or property. (67)

b. False or Fraudulent Pretenses

The false or fraudulent pretenses prong of [section] 1344 covers a wide range of actions, including forging sale documents, falsifying appraisals, and failure to repay bank loans. (68) Misrepresentations may be either explicit or implicit, (69) and need not have been made prior to a transfer or transaction. (70) However, simply presenting checks knowingly drawn on insufficient funds, without more, may not be covered by the language of [section] 1344(2) since "technically speaking, a check is not a factual statement at all, and therefore cannot be characterized as 'true' or 'false.'" (71)

5. Financial Institution

The final element of the BFS requires that the victim or intended victim be a federally insured financial institution. (72) Without proving that the financial institution was federally insured, the government cannot obtain a conviction. (73) While the amended statute does not define "financial institution," the government applies the definition found in [section] 20(1) of Title 18. (74)

Under [section] 1344, a financial institution is considered a victim of bank fraud if it is an actual or intended victim; the bank does not have to be the immediate victim of the fraud. (75) Courts typically find banks to be victims of fraud if the bank had "custody or control" of the funds in question, thereby exposing the bank to a risk of loss or civil liability. (76)

A scheme to defraud a third party of money held in a bank account constitutes a violation of [section] 1344. (77) A conviction under [section] 1344 will not stand, however, unless the defendant's scheme to defraud the third party also intended to defraud a federally insured financial institution. (78) Fraudulent ATM transactions, which simultaneously defraud the legal account holder and the financial institution from which the funds are withdrawn, are commonly prosecuted under [section] 1344. (79)

C. Defenses

While opposing prosecution under BFS, the following defenses have been asserted: (i) the financial institution did not have "custody or control" of the assets in question; (ii) the defendant was acting in good faith; and/or (iii) the indictment was multiplicitous. This part will examine these defenses and their respective limitations.

1. Custody or Control

As a defense to [section] 1344, defendants can argue that the assets were not "under the custody or control" of a federally insured financial institution at the time of the alleged fraud. (80) However, this defense will not succeed on a mere showing that the bank's funds were not directly at risk; as long as the funds involved were under the custody or control of the financial institution, then actual loss to the bank is not required. (81) It is also important to note that the "custody or control" requirement has been interpreted broadly to find defendants guilty of bank fraud where a financial institution has any property interest in the funds targeted by the scheme. (82)

2. Good Faith

A second potential defense under [section] 1344 is to attack the government's evidence of knowledge and intent by demonstrating the defendant's good faith. (83) Good faith is a complete defense to bank fraud, as it is inconsistent with an intent to defraud. (84) However, it is important to note that a defendant is not considered to have acted in good faith when an illegal act is performed with a belief that the act was legal. (85) Further, the good faith defense does not apply in situations where the defendant made a deliberate and conscious effort to avoid discovering the details of suspicious activity, (86) or had a belief that the collusion of the defrauded bank's officers in the scheme removed the fraudulent component. (87)

3. Multiplicity of the Indictment

A multiplicitous indictment, one that charges a single offense in multiple counts, (88) creates the risk that a defendant will be punished twice for the same conduct in violation of the Constitutional guarantee against double jeopardy. (89) When a defendant charged with multiple counts, under [section] 1344 and other statutes, raises a double jeopardy defense, courts examine whether the various counts require proof of different elements or factors. (90)

The circuits that have addressed multiplicity in the context of bank fraud have generally agreed that the BFS only imposes punishment for each "execution" of the scheme, unlike the mail and wire fraud statutes, which punish each "act" undertaken in furtherance of a scheme to defraud. (91) Thus, the critical inquiry is whether a defendant executed a "scheme." (92) The answer to that question is often obscure (93) and highly fact-specific. (94) At one extreme, the definition of "execution" closely parallels the definition of "acts in furtherance of a scheme" as applied in the mail and wire fraud statutes. (95) At the other extreme, the definition of "execution" characterizes several acts in aid of a single scheme as a single execution. (96) One commentator has noted that to eliminate the confusion and inconsistency surrounding the term "execution," Congress must strike the term from the statute or the Supreme Court must clarify its specific meaning. (97)

To find a middle ground between these two extremes, an increasing number of circuits have held that a single scheme can be executed several times, giving rise to multiple counts. (98) Prosecutors can avoid the multiplicity defense by carefully crafting bank fraud indictments to allege only one execution. (99)

D. Penalties

Sentences for violations of federal criminal laws are determined with reference to the United States Sentencing Guidelines ("Guidelines"). (100) In 2005, the U.S. Supreme Court severed the provision that made the Guidelines mandatory, rendering them "effectively advisory." (101) The Guidelines are one among a number of factors--including the purposes of punishment and the nature and circumstances of the offense and the history and characteristics of the defendant--to be considered in imposing federal sentences. Accordingly, the Guidelines remain highly relevant despite their advisory nature.

Violators of [section] 1344 face maximum penalties of one million dollars in fines or thirty years imprisonment, or both, (102) and are sentenced under section 2B1.1 of the Guidelines. (103) The base offense level under the Guidelines is seven. (104) If the loss at issue exceeds $5,000, the offense level is increased by an amount indicated in the loss table. (105) In situations where the wrongdoer's gross receipts from the crime exceed $1 million, the court should apply a level increase of two, (106) unless the fraud "substantially jeopardized the safety and soundness of a financial institution," in which case a level increase of four is warranted, regardless of the amount of gross receipts. (107) If the offense level remains below twenty-four after this increase, then the offense level will be adjusted upward to twenty-four. (108)

In October 1998, the Sentencing Commission amended the Guidelines (109) to provide for an increase in offense level by two for fraud "committed through mass-marketing." (110) The revised Guidelines also increase the offense level by two for fraudulent schemes (1) committed from outside the United States; (111) (2) relocated to another jurisdiction to evade prosecution; (112) or (3) that "involved sophisticated means." (113) In these cases, if the offense level is less than twelve after the two level increase, it increases to twelve. (114)

In applying the Guidelines, courts are not bound by an overly strict standard when calculating the damage done by a defendant. (115) While courts must use accurate information in applying the Guidelines, they are not required to rely on exact figures. (116)

E. Supplemental Enforcement Mechanisms

In addition to the criminal sanctions prescribed by the BFS, the federal government has established a comprehensive network of supplemental enforcement mechanisms to deter insider fraud, mainly in response to the financial institution failures of the 1980s. (117) Among these mechanisms are (i) suspicious activity reporting and (ii) administrative sanctions designed to protect federally insured financial institutions after the detection of fraudulent activity.

1. Suspicious Activity Report

To assist with the detection of illegal activities and suspicious financial transactions, the Department of the Treasury, the Office of Thrift Supervision, the Office of the Comptroller of the Currency ("OCC"), the Federal Reserve, and the Federal Deposit Insurance Corporation ("FDIC") created the Suspicious Activity Report ("SAR") by joint regulation in 1996. (118) An institution subject to the SAR requirement (119) must submit a report "when it detects a known or suspected violation of federal law, or a suspicious transaction related to money laundering activity or a violation of the Bank Secrecy Act." (120) More specifically, banking agencies are required to file SARs with the Financial Crimes Enforcement Network (FinCEN) in the following situations:

(i) whenever there is known or suspected insider abuse, regardless of the amount of money involved;

(ii) following any crime or attempted crime against or through a financial institution involving $5,000 or more when a suspect can be identified;

(iii) whenever a financial institution suspects a crime involving $25,000 or more, even without knowledge of the suspects;

(iv) following any transaction through the Banking Institution of $5,000 or more if the financial institution has reason to suspect money laundering;

(v) whenever there is suspicion that a transaction is designed to avoid BSA reporting requirements;

(vi) in the event of a "transaction [which] has no business or apparent lawful purpose or is not the sort of transaction in which the particular customer would normally be expected to engage and the bank has no reasonable explanation for the transaction after confirming the available facts...." (121)

Depository institutions must submit SARs to FinCEN, (122) which then distributes the SARs to the appropriate enforcement agencies. This compilation of the reports provides information on SAR trends and patterns to supplement law enforcement, to furnish tips on improving reporting, and to create an industry forum. (123)

Computer related crimes are the newest areas of crime to use the SAR to track and detect patterns of criminal activity. (124) The federal government now advises that financial institutions also use the SAR to report cases of suspected cyber-crimes. (125) SARs are also critical in the fight against the funding of international terrorism. (126)

2. Civil Sanctions for Insider Fraud

The federal government has also instituted various civil sanctions as a supplemental enforcement mechanism to combat banking fraud. All of the federal bank regulatory agencies of the FDIC and the OCC have administrative authority to protect federally insured institutions after the exposure of fraud. Section 1818 of Title 12 (127) authorizes civil penalties (128) and the removal and prohibition of insiders and other affiliated parties from participating in the affairs of an insured institution. (129) The sanctions apply not only to insured institutions, but also to all "institution-affiliated parties" (IAPs). (130)

The OCC's Fast Track Enforcement Program supplements these efforts to prevent insiders guilty of low level violations from remaining employed in the banking industry. (131) The program enables the agency to investigate improper activities by IAPs mentioned in SARs, to seek restitution for losses caused by insider fraud, and to prohibit certain IAPs from serving in financial institutions. (132)

The program selection criteria include: (i) subject must be a bank employee, officer, director or principal shareholder of a national bank; (ii) subject has engaged in "a criminal act involving dishonesty or breach of trust" against said institution; (iii) "unqualified evidence" of the offense at issue exists, or the subject admits responsibility; (iv) at least $5,000 was lost by the bank or involved in the transaction; and (v) "prosecution of the person was declined by federal law enforcement agencies" or the subject has entered a pre-trial diversion program. (133) If the "criteria are not met in only a minor way, the OCC is required to see if additional information would allow the criteria to be met." (134)

a. Applicable Law in Civil Cases under FIRREA

i. Atherton v. FDIC

The administrative actions taken by the FDIC have lead to significant questions concerning conflicts between federal and state common law. In Atherton v. FDIC, (135) the Supreme Court resolved a circuit split concerning whether federal or state law supplies the rules of decision in civil prosecutions brought by the FDIC against former principals of failed federally chartered financial institutions. (136) The Court in Atherton held: (i) federal common law does not provide a standard of care for officers and directors of federally insured savings institutions, and (ii) the relevant federal statute, (137) which requires gross negligence for the director and officer liability, does not preclude states from enacting stricter standards making principals liable under a lesser standard of negligence. (138)

The Supreme Court addressed two questions: (i) whether the federal interest in a FIRREA prosecution is sufficiently strong to justify application of a federal common law tort standard, (139) and (ii) how to reconcile the differences between the statutory standard and the controlling state common law standard. (140)

On the first question, the Court held the FDIC's interest in defining the standard of liability in a FIRREA prosecution did not present one of the "few and restricted instances" warranting a federal override of the standards of care established by state common law. (141) In the Court's opinion, state law posed no significant conflict with, or threat to, a federal interest in this situation. (142)

With respect to the second question--the effect of [section] 1821(k)'s gross negligence standard on the common law duty of care borne by bank officers and directors--the Court characterized the provision not as a displacement of common law standards, but rather as a statutory floor. (143) On this point, the Third Circuit had expressed concern that if the gross negligence standard of [section] 1821(k) (which applies after a bank has entered receivership) displaced the common law ordinary negligence standard, bank principals could effectively shield themselves from the consequences of negligent behavior by allowing their banks to go insolvent. (144) The Supreme Court allayed this concern by reading the statute's standard of care as "only a floor--a guarantee that officers and directors must meet at least a gross negligence standard. It does not stand in the way of a stricter standard that the laws of some states provide." (145) Section 1821(k) further provides that "[n]othing in this paragraph shall impair or affect any right of the corporation under other applicable law," (146) which the Court read to embrace state law as well as other federal statutes. (147) Thus, state law provides the duty of care owed by principals of federally chartered institutions, provided it is not more lenient than [section] 1821 (k). (148)

ii. Federal Common Law Post-Atherton: "No-Duty" Rule

The Court in Atherton resolved the question of the standard of care owed by principals of federally chartered institutions; however, the decision left unresolved the issue of whether the duty of care owed by the FDIC following receivership is controlled by federal common law in the face of conflicting state law.

In FDIC v. Healey, (149) the district court rejected the bank principals' affirmative defenses (permitted by Connecticut state law) of contributory negligence and failure to mitigate damages--both based entirely on post-receivership conduct of the FDIC--on the ground that federal common law permits no duty of care to be placed on the FDIC following receivership of a failed financial institution. (150) In response to the contention that Atherton does not allow federal common law to control where state law supplies a standard of care, the court distinguished Atherton both factually and in terms of legal principle. First, the court noted that Healey concerns post-receivership conduct of the FDIC, while Atherton concerns pre-receivership conduct of bank officials; bank failure and receivership present a wholly different legal landscape in which the Atherton analysis is not appropriate. (151) Second, within that post-receivership landscape are federal interests of a type not present in Atherton, which "require deference to the discretionary actions of the FDIC." (152) In light of these countervailing federal interests as to the regulation of federally chartered institutions, to allow "state-law affirmative defenses would assail the discretionary acts of the FDIC [and] would present a significant conflict between federal policy and state law." (153)

Another district court, however, arrived at the opposite conclusion in Resolution Trust Corp. v. Massachusetts Mut. Life Ins. Co. (154) In Resolution Trust, the court allowed the defendant institution to assert contributory negligence and failure to mitigate damages (affirmative defenses permitted by New York state law) by the FDIC post-receivership. (155) The court rejected the federal common law "no-duty" rule, stating that the Supreme Court's decision in O'Melveny & Myers v. FDIC had effectively ended the use of federal common law in cases governed by FIRREA. (156) Secondly, the court noted that provisions of FIRREA explicitly incorporated state standards of law and that such incorporation had been affirmed by Atherton. (157) Finally, while the court acknowledged that while FIRREA vests discretion in the FDIC acting in receivership, the court stated that FIRREA "contains no provision that insulates the FDIC from state law affirmative defenses regarding the FDIC's post-receivership conduct." (158)

iii. Federal Common Law Post-Atherton: D'Oench Doctrine

The Court's decisions in O'Melveny and Atherton sparked a debate in the circuits over whether another area of federal common law, the D'Oench doctrine, survived the adoption of 12 U.S.C. [section] 1823(e). (159) The D'Oench doctrine states that in defending against the FDIC's attempt to collect on a bank note, the borrower or guarantor of the note is estopped from using a secret side agreement (or representation by the bank) that would misrepresent the financial status and obligations of the institution to creditors or regulatory agencies. (160)

The Eleventh Circuit ruled in Motorcity of Jacksonville, Ltd. v. Southeast Bank, N.A. (161) that the federal common law D'Oench doctrine survives Atherton. In Motorcity, the court relied on D'Oench to reject a debtor's proffer of an unwritten side agreement with a failed bank as a defense against FDIC collection. (162) At issue on appeal to the Supreme Court was "whether Congress intended FIRREA to supplant the previously established and long-standing federal common law D'Oench doctrine." (163)

After Atherton, the Supreme Court remanded Motorcity for further consideration. On remand, the Eleventh Circuit affirmed its earlier holding, distinguishing Atherton on two grounds. First, since Atherton held that state common law, not [section] 1821, supplied the controlling legal standard, that case provides no support for the contention that the federal common law D'Oench doctrine had been superseded by federal statute. (164) Second, unlike the common law principle offered by the government in Atherton, the establishment of the D'Oench doctrine came after the creation of the Erie doctrine (165) because it presented one of the "few and restricted" instances in which there are "a significant federal interest and policy which warranted the creation of a federal common law rule." (166)

The Eleventh Circuit does not stand alone in its view of the D'Oench doctrine. The Fourth Circuit, while acknowledging that [section] 1823 "substantially codified" the common law, goes on to hold that while [section] 1823 partially codifies the D'Oench doctrine, it does not preempt it. (167) The Fifth Circuit also continues to recognize the D'Oench doctrine. (168) While the Fourth and Eleventh Circuits hold that the federal common law announced in D'Oench survives the Court's decision in Atherton, a number of circuits disagree. Relying on O'Melveny, (169) the Third Circuit held in FDIC v. Deglau (170) that the D'Oench doctrine does not survive [section] 1823. (171) Finding that the statute is "detailed and comprehensive," the Court held it does not need D'Oench to supplement it. (172) Similarly, both the Eighth and D.C. Circuits have held that the D'Oench doctrine is preempted by [section] 1823. (173) The Ninth Circuit has limited D'Oench's applicability in cases involving the FDIC, though it has declined to go as far as holding that D'Oench was overruled by Atherton and O'Melveny. (174)

The Tenth Circuit has taken a more moderate approach to the D'Oench debate. This circuit views [section] 1823 simply as a codification of the D'Oench doctrine, and applies virtually the same standards under either controlling authority. (175) The Second Circuit applies a similar approach. (176)

b. Double Jeopardy

i. The Dual Functions of the FDIC

The enabling legislation of the FDIC endows it with dual roles: (i) governmental regulator of federally-insured financial institutions, and (ii) receiver of failed institutions. (177) In the latter role, it stands in the shoes of the bankrupt institution, acting as a private party vindicating private interests. (178) When an FDIC-insured institution enters receivership, the agency acts as both regulator and receiver for the same institution. (179) Because FIRREA provides for criminal as well as civil sanctions, (180) this split role has occasionally produced double jeopardy concerns. (181)

ii. Hudson v. United States

The Supreme Court dispensed with the argument that the Double Jeopardy Clause constituted a barrier to future prosecution by the FDIC acting in its capacity as receiver in Hudson v. United States. (182) The Court stated that the Fifth Amendment's Double Jeopardy Clause only protected defendants from successive criminal punishments and that sanctions imposed by the FDIC post-receivership are civil. (183) The Court held that a civil sanction constitutes criminal punishment only on the "clearest proof" that the sanction is so "punitive in purpose or effect as to transform what was clearly intended as a civil remedy into a criminal penalty." (184) The Court concluded that while the sanctions in question were designed to serve as a deterrent, that purpose alone did not transform the sanction into a criminal punishment. (185) Thus, prior civil proceedings that do not rise to the Hudson standard for criminality fail to trigger the Double Jeopardy Clause.

III. CRIMINAL PENALTIES UNDER 12 U.S.C. [section] 1818(j)

As noted above, 12 U.S.C. [section] 1818(e) provides for the administrative removal of institution-affiliated parties (IAPs) and prohibits any further participation in the affairs of the institution by those parties. (186) After an IAP has been served with a removal or suspension order under the civil provisions of FIRREA, [section] 1818(j) criminalizes the further participation of IAPs in the affairs of an FDIC-insured institution, absent prior written approval from the FDIC. The criminal penalty applies regardless of whether the underlying offenses, standing alone, would subject the offender to administrative sanctions only. (187)

A. Scope

The criminal penalties in [section] 1818(j) apply to bank officers, employees, controlling stockholders as well as appraisers, attorneys and accountants who: (i) cause financial loss to an FDIC-insured institution; (ii) prejudice the interests of the bank's depositors; or (iii) receive financial gain or other benefit from the violation. (188)

Before FIRREA, IAPs could escape prosecution by resigning before the federal regulator began removal proceedings. (189) Consequently, Congress closed this legislative loophole by including a provision in FIRREA that allows banking regulators to initiate enforcement of penalties against individuals for six years after the date of their termination of employment. (190)

B. Elements

The elements of a [section] 1818(j) criminal violation require that the defendant (i) knowingly participates in the conduct of the affairs of any insured financial institution; (ii) is subject to an order which prohibits such participation; and (iii) has not received written approval from a regulatory agency prior to such participation. (191)

C. Penalties

Section 1818(j) provides that any violator shall be fined not more than $1,000,000, imprisoned for up to five years, or both. (192)

IV. THE BANK SECRECY ACT

This Section describes the Bank Secrecy Act. The Section addresses the Act's statutory rationales, examines its record-keeping requirements, and discusses its reporting requirements and analyzes structuring offenses.

A. Purpose

In 1970, Congress enacted the Currency and Foreign Transactions Reporting Act, commonly referred to as the Bank Secrecy Act (193) ("BSA"), out of concern for the increasing use of financial institutions to launder unreported income and obtain funds illegally. (194) The BSA requires that financial institutions maintain "certain reports or records where they have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings, or in the conduct of intelligence or counterintelligence activities, including analysis, to protect against international terrorism." (195) This enhanced documentation of the deposit, transfer, and exchange of currency can be used to uncover illegal concealment and thus improve the effectiveness of law enforcement. (196)

The increased interest in and importance of the BSA is due to the recognition of the global scale on which illicit funds enter the flow of commerce through legitimate financial institutions. The illegal drug trade and global terrorism groups rely heavily on these financial institutions to integrate and move such funds. (197)

The BSA, as amended, (198) requires financial institutions (199) to keep certain account records of currency transactions over indicated dollar amounts, to report currency transactions of more than $10,000 into or out of a financial institution, and to disclose certain accounts that United States citizens and residents hold at foreign financial institutions. (200) The BSA imposes civil and criminal penalties on financial institutions, non-financial trades, and businesses. (201)

In response to the terrorist attacks on September 11, 2001, Congress enacted the USA Patriot Act of 2001. (202) This legislation amended several provisions of the BSA, including broadening the definition of "financial institution" under the BSA; (203) expanding requirements for financial and certain non-financial trade or business institutions with respect to recordkeeping; reporting, due diligence, anti-money laundering programs, "Know Your Customer" standards, (204) and correspondent accounts with foreign shell banks; and increasing the civil and criminal penalties for certain BSA offenses. (205) Title HI of the USA Patriot Act is the International Money Laundering Abatement and Financial Anti-Terrorism Act; its purposes include: preventing, detecting, and prosecuting international money laundering and the financing of terrorism; providing a clear national mandate for subjecting those foreign jurisdictions and financial institutions that pose particular, identifiable opportunities for criminal abuse to special scrutiny; and ensuring that all appropriate elements of the financial services industry are subject to appropriate requirements of reporting potential money laundering transactions to the proper authorities. (206)

B. Title I: Record-Keeping Requirements

Provisions of the BSA authorize the Secretary of Treasury to promulgate regulations requiring banks, securities brokers and dealers, and certain uninsured financial institutions to maintain adequate records of customers' transactions that can be used in criminal, tax, or regulatory investigations and proceedings. (207) Any person who willfully or through gross negligence fails to maintain the requisite records or causes a violation of any of the requirements under the BSA or those prescribed by the Secretary of the Treasury ("Secretary") can be subject to civil (208) and/or criminal penalties. (209) The record-keeping requirements facilitate law enforcement investigations and proceedings as well as "the conduct of intelligence and counterintelligence activities ... to protect against domestic and international terrorism." (210)

Each financial institution must retain for a period of not less than five years the records of: (i) certain transactions that exceed $I0,000; (211) (ii) the sale or issuance of bank checks, cashier's checks, traveler's checks, or money orders that equal or exceed $3,000; (212) and (iii) funds transfers and transmittals that equal or exceed $3,000. (213) Additional record-keeping requirements apply specifically to banks, securities brokers and dealers, casinos, and currency dealers and exchangers. (214)

1. Additional Records to Be Retained by Banks

The regulations promulgated by the Secretary set forth several record-keeping requirements specifically for banks. (215) Every bank is required to obtain the taxpayer identification number of the customer involved, or of a person having a financial interest in the certificate where there are two or more customers, "[w]ith respect to each certificate of deposit sold or redeemed ... [and] each deposit or share account opened." (216) The Secretary is also required to prescribe regulations establishing minimum standards for financial institutions and their customers regarding the verification of the identity of the customer opening of an account. (217) In response, Treasury, FinCEN, (218) and the five federal banking regulatory agencies (Federal Reserve Board, FDIC, NCUA, OCC, and OTS) issued a rule requiring covered institutions to institute a written Customer Identification Program (CIP). (219) Each CIP must at minimum: (1) provide for a system of internal controls to assure ongoing compliance; (2) provide for independent testing to assure ongoing compliance; (3) designate individuals responsible for coordinating and monitoring ongoing compliance, and; (4) provide training for appropriate personnel. (220) Treasury has promulgated similar customer identification rules governing futures commission merchants and introducing brokers (221) as well as mutual funds and investment companies. (222)

In addition, a bank must maintain records covering a wide range of business transactions, including transactions in excess of $100 and foreign financial transactions in excess of $10,000. (223) Finally, the bank must retain signatory cards for each account-holding customer. (224) These documentation requirements facilitate the identification of customers and the transactions in which they engage to decrease the incidence of fraudulent banking activity.

2. Additional Records to Be Retained by Brokers and Dealers in Securities

A broker or dealer in securities must secure and maintain the taxpayer identification numbers of customers within thirty days of the date a brokerage account is opened. (225) The broker or dealer in securities must also retain the original copies of the following: (i) a signature card or grant of trading authority; (ii) each record required by the Securities Exchange Commission under 17 C.F.R. [section][section] 240.17a3(a)(1)-(3), (5)-(9); (iii) a record of each remittance or transfer of funds, currency, checks, other monetary instruments, investment securities, or credit of more than $10,000 to a person, place, or account outside the United States; and (iv) a record of each receipt of currency, checks, other monetary instruments, investment securities, or credit of more than $10,000 received on any one occasion directly from any person, place, or account outside the United States. (226)

3. Additional Records to be Retained by Casinos (227)

Casinos, in addition to what is required by virtue of being included in the definition of financial institution, (228) are subject to several additional recordkeeping requirements. (229) Casinos must verify and record the name, social security number, and permanent address of each person who has a financial interest in funds deposited with an account opened by, or credit extended by the casino. (230)

In addition, for each account, casinos must retain records of: (i) each receipt of funds, (231) bookkeeping entry, (232) statement, ledger card, or other account record; (233) (ii) all credit extension exceeding $2,500, including the terms and conditions, and repayments; (234) (iii) advice, requests, or instruction received or given by the casino regarding foreign transactions; (235) (iv) all records that would be needed to reconstruct a deposit or credit account; (236) (v) all records required under local regulations; (237) and (vi) all records used to monitor a customer's gaming activity. (238) Casinos must also log certain transactions involving checks in the amount of $3,000 or more. (239)

4. Additional Records to be Retained by Currency Dealers and Exchangers

Currency dealers and exchangers must secure within thirty days the name, address, and taxpayer identification numbers of each person opening an account or receiving a line of credit, (240) and of each person who presents a certificate of deposit for payment into that account. (241)

In addition, currency dealers and exchangers must maintain a system sufficient to prepare an accurate balance sheet and income statement (242) and retain records of the following: (i) bank statements; (243) (ii) daily work records needed to reconstruct currency transactions with customers and foreign banks; (244) (iii) exchanges of currency in excess of $1,000; (245) (iv) signature cards; (246) (v) transfers exceeding $10,000 to a person, account, or place outside the United States; (247) (vi) receipts of funds exceeding $10,000; (248) and (vii) information needed to reconstruct an account and trace a deposited check in excess of $100. (249) These requirements do not apply to banks that offer currency services to their customers as an adjunct to their regular service. (250) These record-keeping requirements promote transactional transparency among banks, brokers and dealers in securities, casinos and currency dealers and exchangers.

C. Title H: Reporting Requirements

1. Money Services Businesses

Under Title II of the BSA, (251) all money services businesses must register with the Secretary and maintain a list of authorized agents in compliance with Treasury regulations (252) The phrase "money services businesses" (253) encompasses currency dealers and exchangers; (254) check cashers; (255) money transmitters; (256) and any issuer, seller, or redeemer of traveler's checks, money orders, or stored value. (257) All money services businesses were required to register with the Secretary by December 31, 2001, and re-registration is required every two years thereafter. (258) Registration includes the information required under Title II of the BSA and any additional information as required by the Treasury Secretary. (259)

In addition, each January 1, a money services business must update the information on a list of its agents, (260) including each agent's name, address, telephone number, and types of services provided; (261) the name and address of any depository institution where the agent has a transaction account; (262) and the months of the previous year in which the agent's gross transaction amount exceeded $100,000. (263) This list must be made available to the Secretary upon request. (264) Failure to comply with any requirement can result in a $5,000 civil penalty per day of violation, (265) a civil action to enjoin the violation, (266) and criminal penalties that may include fines and imprisonment. (267) Under this disclosure and registration scheme, the Secretary has a database of information detailing money services businesses' accessibility and the type of business to make available to law enforcement.

2. Currency Transaction Reports

Under Title II of the BSA, (268) domestic financial institutions must report transactions involving the payment, receipt, or transfer of United States currency in excess of $10,000. (269) The Currency Transaction Report (CTR) is the primary reporting mechanism for financial institutions other than casinos. (270) The Treasury also requires certain other reports. (271)

a. Domestic Currency Transactions

Financial institutions, other than casinos, are required to "file a report of each deposit, withdrawal, exchange of currency or other payment or transfer by, through, or to such financial institution which involves a transaction in currency of more than $10,000." (272) Under certain circumstances, transactions that individually are less than $10,000 but in aggregate total more than $10,000 during any one business day are treated as a single transaction. (273) Banks do not have to report the transactions of "exempt persons," (274) including other banks, (275) government agencies and entities, (276) and entities and their subsidiaries listed on the New York Stock Exchange, the American Stock Exchange, the NASDAQ Stock Market, or any of these markets' subsidiaries. (277) Banks also do not have to report certain payroll withdrawals, (278) or any transaction with a commercial enterprise that meets specified criteria. (279) Casinos are required to "file a report of each transaction in currency, involving either cash in or cash out, of more than $10,000." (280) Multiple transactions are treated as a single transaction if "the casino has knowledge that they are by, or on behalf of, any person and result in either cash in or cash out totaling more than $10,000 during any gaming day." (281) A casino is deemed to have knowledge if any employee of the casino, acting within the scope of his or her employment, has knowledge either directly or through review of casino records. (282)

b. Foreign Currency Transactions

Banks and other depository institutions as well as non-banking enterprises in the United States must file periodic reports (283) "with respect to specified claims and liabilities positions" in foreign countries. (284) Non-banking enterprises must file reports on deposits and certificates of deposit with foreign banks as well as monthly and quarterly reports on "specified claims and liabilities positions with unaffiliated foreigners." (285) Both banks and non-banking enterprises must report on "domestic and foreign long-term securities or other financial assets with foreign residents." (286) The civil and criminal penalties imposed for violations of other sections of the BSA do not apply to foreign currency transactions. (287) Instead, the penalty provision for proscribed foreign currency transactions limits the civil penalty to $10,000. (288)

c. Transactions with Foreign Financial Agencies

A foreign resident or citizen doing business in the United States who engages in any transaction with any person associated with a foreign-based financial agency must keep records and file reports that include the identities of the participants, their legal capacities, the real parties in interest, and descriptions of the transactions. (289) Furthermore, persons having a financial interest in a foreign-based financial account must report those interests on their annual federal income tax returns. (290)

3. International Transportation of Currency and Monetary Instruments Reports

Under 31 U.S.C. [section] 5316, a person who "transports, is about to transport, or has transported" currency or monetary instruments exceeding $10,000 out of, into, or through the United States "at one time," (291) or who receives such an amount from abroad, (292) must file a Report of International Transportation of Currency or other Monetary Instruments (CMIR). (293) Failure to file a CMIR can result in a criminal penalty, as well as forfeiture of the amount transported. (294)

a. Elements of the Offense

The elements of a CMIR criminal offense under [section]5316 are: (i) a legal duty to file a CMIR; (ii) knowledge of the reporting requirement; and (iii) willful failure to file the CMIR. (295)

i. Legal Duty to File

The regulations impose reporting requirements on any person receiving or transporting currency or other monetary instruments exceeding $10,000 at one time out of or through the United States. (296) The report must contain the "amount, the date of receipt, the form of monetary instruments, and the person from whom received." (297) The regulations exempt certain entities from filing a report when transporting currency in excess of $10,000. (298) The Secretary's definition of "at one time" includes attempts to structure the transaction so as to avoid reporting requirements. (299) The division of money among several people to avoid triggering reporting requirements is also prohibited. (300)

The legal duty to report is violated at the time of entry or departure and within 15 days of receipt of funds from abroad (301) and is determined on a case-by-case basis. (302) The offense of bulk cash smuggling is triggered when a person knowingly conceals more than $10,000 of currency or other monetary instruments on his person or in luggage with the intent to evade a currency reporting requirement under [section] 5316 (303) by transporting or transferring such currency or monetary instruments. (304) One district court, eliciting a general principle from the holdings of various circuit court cases, stated, "the 'time of departure' from the country is reached when one is reasonably close, both spatially and temporally, to the physical point of departure itself, and manifests a definite commitment to leave." (305)

ii. Knowledge

Knowledge of the reporting requirement forms an essential element of a [section] 5316 violation. (306) The government must have placed travelers on sufficient notice of the reporting requirements. (307) Notice is sufficient where the government has posted signs near the areas of departure, (308) where stated orally by Customs officers, (309) and where the defendant has previously reported transporting monetary instruments. (310) Proficiency F.3d e English language is not required where the government has taken steps to provide notice to those of limited English competency. (311)

The knowledge requirement may be difficult to meet where the defendant either enters or leaves the United States without passing through an established port of entry or departure. (312) Courts may infer knowledge, however, from the surrounding facts and circumstances. (313)

iii. Willful Violation of the Reporting Requirement

Only willful violations are criminally punishable under [section] 5316. (314) The government must therefore show that the defendant had knowledge of the legal duty to report and "acted with knowledge that his conduct [to avoid reporting] was unlawful." (315) The structuring prohibition has been extended by [section] 5324 (including conduct calculated to avoid the reporting requirements of [section] 5316), [section] 5325 (requiring banks to report sales of bank checks and other instruments of $3,000 or more), and [section] 5326 (authorizing the Secretary to promulgate additional reporting requirements for certain domestic currency transactions). (316) The government is not required to demonstrate that the defendant acted willfully for [section] 5324 structuring offenses. (317)

b. Enforcement and Penalties

Enforcement of [section] 5316 is delegated by the Secretary to the Commissioner of Customs. (318) A violation is punishable by up to five years' imprisonment and a fine of up to $250,000, (319) or by ten years' imprisonment and up to a $500,000 fine where the offender commits the violation while violating another federal law or as part of a pattern of illegal activity involving more than $100,000 in a twelve-month period. (320) In addition, the unreported cash or monetary instrument is subject to civil (321) or criminal (322) forfeiture.

c. Defenses

Convictions for [section] 5316 violations generally have withstood Fourth and Fifth Amendment challenges. Courts have uniformly held that warrantless searches authorized by [section] 5317(b) (323) are constitutional under the Fourth Amendment. (324) Searches of persons entering or leaving the United States fall within the border search exception to the Fourth Amendment. (325) Moreover, the reporting requirement does not violate the individual's Fifth Amendment protection against self-incrimination. (326) The imposition of criminal (327) or civil forfeiture under 31 U.S.C. [section] 5317(c) in connection with a [section] 5316 violation, however, is vulnerable to challenge under the Eighth Amendment's Excessive Fines Clause (328) and possibly under the Fifth Amendment's Double Jeopardy Clause. (329)

i. Excessive Fines

In United States v. Bajakajian, (330) the Supreme Court held that imposition of a criminal forfeiture (331) in a [section] 5316 conviction was punitive and, therefore, constituted an illegitimate Eighth Amendment fine. (332) In its first application of the Excessive Fines Clause, (333) the Court adopted the standard of "gross disproportionality" to determine whether a punitive forfeiture is constitutionally excessive. (334) Applying this standard, the Court found the magnitude of the $377,144 forfeiture grossly disproportional to the gravity of the defendant's offense. (335) The Court noted that the offense was solely one of reporting; the violation was "unrelated to any other illegal activities"; the defendant did not "fit into the class of persons [money launderers, drug traffickers, tax evaders, etc.] for whom the statute was principally designed"; the forfeiture greatly exceeded the maximum the defendant could have been fined; and the harm caused by the defendant's acton-depriving the government of information-was minimal. (336)

Civil in rem forfeiture pursuant to [section] 5317 can constitute impermissible punishment under the Eighth Amendment. (337) Civil in rem forfeitures traditionally had been viewed as nonpunitive because they were not punishments against an individual for an offense; however, the Bajakajian Court, while distinguishing criminal from nonpunitive, civil in rem forfeiture, noted that:

   [i]t does not follow ... that all modern civil in rem forfeitures
   are nonpunitive and thus beyond the coverage of the Excessive Fines
   Clause ... [A forfeiture] is a 'fine' for Eighth Amendment purposes
   if it constitutes punishment even in part, regardless of whether
   the proceeding is styled in rem or in personam. (338)

Although forfeiture of property as an instrumentality of a crime may also serve a remedial, non-punitive statutory purpose, (339) the Court rejected this characterization of unreported currency because it does not "bear any of the hallmarks of traditional civil in rem forfeitures." (340) The Bajakajian Court, finding that the forfeiture did not serve a remedial purpose by compensating the Government for a loss, affirmed the Ninth Circuit's reasoning that the currency did not facilitate the commission of a crime and was "merely the subject of the crime of failure to report." (341) "Cash in a suitcase does not facilitate the commission of that crime as, for example, an automobile facilitates the transportation of goods concealed to avoid taxes," thus, the currency was not an instrumentality of the drug-related offense. (342)

ii. Double Jeopardy

The rejection by the Bajakajian Court of the claim that currency forfeiture for a [section] 5316 offense acted as a remedy (343) may have made [section] 5317(c)(2) regarding civil forfeiture more vulnerable to challenge as punitive in effect, thus violating the Double Jeopardy Clause when imposed in conjunction with criminal penalties. Under the Court's analysis in United States v. Ursery, (344) the most significant factor in determining whether a nominally civil forfeiture proceeding is punitive and criminal in effect for double jeopardy purposes is whether the statute serves non-punitive, remedial goals. (345) However, courts thus far have held that imposition of a [section] 5317(c)(2) civil forfeiture in addition to criminal penalties does not violate the Double Jeopardy Clause. (346)

The courts are likely to treat a [section] 5317(c)(1) criminal forfeiture imposed for a [section] 5316 offense differently. Although Bajakajian expressly invalidated the contested criminal forfeiture under the Excessive Fines Clause, (347) the Court's reasoning strongly suggests that the forfeiture can be challenged under the Double Jeopardy Clause. In holding that a criminal forfeiture neither serves a remedial purpose nor applies to the instrumentality of a crime, the Court indicated that the statutorily-directed imposition of this criminal forfeiture upon a person convicted of a [section] 5316 violation would constitute double jeopardy. (348) Post-Bajakajian jurisprudence contains no case in which a court has faced such a claim.

4. Structuring Transactions to Avoid Reporting Requirements

The BSA (349) makes it a criminal offense to: (i) "cause or attempt to cause" a report not to be filed; (350) (ii) cause or attempt to cause a report to be filed with "a material omission or misstatement of fact," (351) or (iii) structure or assist in structuring financial transactions to avoid or attempt to avoid reporting requirements. (352) Structured transactions are those involving monetary instruments that, when acquired or deposited individually, are less than $10,000 but that, in aggregate, total over $10,000. (353)

a. Elements

To prove a structuring offense, the government must establish that the defendant (1) engaged in acts of structuring, (2) did so with the knowledge of the reporting requirements of financial institutions under [section] 5324, and (3) intended to evade those reporting requirements. (354) For example, if a defendant deposited $8,000 into each of two or more banks with the intent to avoid the reporting requirements, the defendant would be guilty of a criminal structuring offense under [section] 5324, despite neither bank alone having a duty to report the transaction. (355) Proving the defendant acted for the purpose of evading the reporting requirements necessarily entails evidence of the defendant's knowledge of those requirements. (356) While structuring alone is not sufficient to prove a purpose of evasion of the reporting requirements, (357) the method of the structuring can be significant in evincing an intent to evade. (358) Although currently a mere showing of the defendant's intent to evade the reporting requirement may establish the requisite mental state, courts apply the law in force at the time of the alleged offense. (359)

b. Enforcement and Penalties

A structuring offense is punishable by fines under Title 18, maximum imprisonment of not more than five years, or both. (360) A person who violates the structuring statute "while violating another law of the United States or as part of a pattern of any illegal activity involving more than $100,000 in a twelve-month period" is subject to enhanced penalties such as double fines and/or imprisonment for up to ten years. (361) Property involved in or traceable to a structuring offense for which a conviction has been obtained is subject to criminal forfeiture. (362)

c. Defenses

Before the Money Laundering Suppression Act of 1994 (MLSA), good faith reliance on the advice of counsel functioned as a complete defense to the willfulness requirement. (363) To prevail, the defendant had to show he "disclosed all relevant facts to his attorney and relied on the attorney's advice based on the disclosure." (364) Congress appears to have foreclosed this defense by removing the willfulness requirement.

Although the MLSA removed the willfulness requirement of the structuring offense, [section] 5324 still contains an implied scienter requirement of knowingly engaging in unlawful conduct. (365) Because the government must continue to prove the defendant's knowledge of the reporting requirements, [section] 5324 most likely will continue to be upheld against vagueness challenges. (366) Additionally, the statute has withstood Fifth Amendment self-incrimination challenges. (367)

To combat fraudulent transactions with financial institutions, including banks, brokers or dealers in securities, casinos and currency dealers and exchangers, Congress has increased the burden on these institutions with respect to customer identification, record-keeping, verification and disclosure.

(1.) 18 U.S.C. [section] 1344 (2000).

(2.) Financial Institutions Reform, Recovery and Enforcement Act of 1989, Pub. L. No. 101-73, 103 Stat. 500 (codified in scattered sections of 18 U.S.C.).

(3.) Bank Secrecy Act, 12 U.S.C. [section] 1829(b), 1951-1959 (2000); 31 U.S.C. [section][section] 5311-5322 (2000).

(4.) See United States v. Laljie, 184 F.3d 180, 189 (2d Cir. 1999) (ruling statute requires bank be actual or intended victim of fraud because purpose of [section] 1344 is to protect federal government's interest as insurer of financial institutions).

(5.) Williams v. United States, 458 U.S. 279 0982).

(6.) Id. at 290 (reversing conviction under 18 U.S.C. [section] 1014, which criminalizes false statements to financial institutions, on grounds it does not reach check-kiting schemes); see also United States v. Cronic, 900 F.2d 1511, 1512 (10th Cir. 1990) (holding 18 U.S.C. [section] 1341 does not reach check-kiting); Steven M. Biskupic, Fine Tuning the Bank Fraud Statute: A Prosecutor's Perspective, 82 MARQ. L. REV. 381,382-92 (1999) (discussing [section] 1344 as "broad" and "flexible" statute passed to protect financial institutions from check kites and fraud schemes not covered by other laws).

Check-kiting is described as, "drawing checks on an account in one bank and depositing them in an account in a second bank when neither account has sufficient funds to cover the amounts drawn. Just before the checks are returned for payment to the first bank, the kiter covers them by depositing checks drawn on the account in the second bank. Due to the delay created by the collection of funds by one bank from the other, known as float time, an artificial balance is created." Id. at n.4.

(7.) Biskupic, supra note 6, at 382. The current BFS states that:

[w]hoever 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 not more than 30 years, or both.

18 U.S.C. [section] 1344 (2000).

(8.) For convictions affirmed under [section] 1344, see United States v. Lam, 338 F.3d 868 (8th Cir. 2003) (affirming conviction for check-kiting under [section] 1344); United States v. Matt, 116 F.3d 971, 972, 975 (2d Cir. 1997) (upholding conviction for check-kiting under [section] 1344); United States v. Hess, 79 F.3d 1217, 1218-19 (D.C. Cir. 1996) (discussing check-kiting offense generally).

(9.) For convictions affirmed under [section] 1344, see United States v. Cruz, 317 F.3d 763 (7th Cir. 2003) (affirming conviction and sentence for bank fraud under [section] 1344 for check forging); United States v. Hoglund, 178 F.3d 410, 413-14 (6th Cir. 1999) (upholding conviction under [section] 1344 for forging client signatures on settlement checks by attorney); United States v. Studevent, 116 F.3d 1559, 1561 (D.C. Cir. 1997) (affirming conviction under [section] 1344 for stealing and forging checks from former employer).

(10.) For convictions affirmed under [section] 1344, see United States v. Farr, 297 F.3d 651 (7th Cir. 2002) (upholding conviction under [section] 1344 for submitting false income tax returns and W-2 statements in support of loan applications); United States v. Colon-Munoz, 192 F.3d 210, 221 (1st Cir. 1999) (upholding conviction under [section] 1344 for wrongfully obtaining bank funds to pay personal debt by characterizing transaction as loan); United States v. Nash, 115 F.3d 1431, 1434 (9th Cir. 1997) (finding false statements on income tax returns submitted as part of loan application process fall under [section] 1344); United States v. Swinton, 75 F.3d 374, 376-77 (8th Cir. 1996) (affirming conviction under [section] 1344 for conducting scheme to obtain funds through false representations in loan process).

(11.) For convictions affirmed under [section] 1344, see United States v. Osborne, 332 F.3d 1307 (10th Cir. 2003) (affirming conviction and sentence for bank fraud under [section] 1344 for depositing stolen checks); United States v. Brandon, 298 F.3d 307 (4th Cir. 2002) (upholding conviction under [section] 1344 for stealing blank checks from persons with checking accounts at various federally insured banks); United States v. Torres, 209 F.3d 308, 309-10 (3d Cir. 2000) (affirming sentence for opening money market account under assumed name to deposit stolen U.S. Treasury check); United States v. Hill, 197 F.3d 436, 436-45 (10th Cir. 1999) (affirming conviction under [section] 1344 for withdrawing funds from account resulting from deposit of single stolen and forged check); United States v. Sammoury, 74 F.3d 1341, 1342, 1346 (D.C. Cir. 1996) (affirming sentence for stealing checks from charity for which defendant worked).

(12.) For convictions affirmed under [section] 1344, see Lavin v. United States, 299 F.3d 129 (2d Cir. 2002) (affirming conviction under [section] 1344 for making unauthorized cash withdrawals from ATM); United States v. Fadayini, 28 F.3d 1236, 1238-42 (D.C. Cir. 1994) (upholding conviction under [section] 1344 for fraudulent use of ATM).

(13.) For convictions affirmed under [section] 1344, see United States v. Jenkins, 210 F.3d 884 (8th Cir. 2000) (affirming conviction under [section] 1344 for making false statements to bank by depositing credit card receipts for fictitious sales); United States v. Brown, 31 F.3d 484, 486-87 (7th Cir. 1994) (affirming conviction under [section] 1344 for involvement in scheme that inappropriately processed third-party telemarketer credit card charges in violation of bank regulation).

(14.) For convictions affirmed under [section] 1344, see United States v. Guyon, 27 F.3d 723, 725 (1st Cir. 1994) (affirming [section] 1344 conviction for obtaining student loans under false identities while also forging loan applications, signatures, and certifications of university official); see also Tom Leander, Persistent Dropout Jailed for Student Loan Fraud, AM. BANKER, Dec. 19, 1989, at 4 (discussing borrower who repeatedly claimed bona fide student status to obtain loans, then withdrew from school).

(15.) See S. REP. NO. 98-225, at 379 (1983), reprinted in 1984 U.S.C.C.A.N. 3182, 3519 ("[U]se of bogus or 'shell' offshore banks has increasingly become a means of perpetrating major frauds on domestic banks."). But see United States. v. Rasco, 853 F.2d 501,503 n.1 (7th Cir. 1988) (dismissing, before trial, indictment under [section] 1344 for bribery of bank officer during scheme to launder money from offshore bank).

(16.) See United States v. Matousek, 894 F.2d 1012, 1013-14 (8th Cir. 1990) (interpreting [section] 1344 broadly to include automobile titles that are fraudulently pledged to bank).

(17.) See United States v. Allen, 87 F.3d 1224, 1225 (11th Cir. 1996) (concerning conviction under [section] 1344 of loan installment employee who diverted bank funds into own account).

(18.) See Jenkins, 210 F.3d at 886 (affirming conviction under [section] 1014 and [section] 1344 for depositing credit card receipts for fictitious sales and representing to bank that genuine sales occurred).

(19.) See United States v. Gregg, 179 F.3d 1312, 1314-15 (11th Cir. 1999) (concerning conviction under [section] 1344 of defendant who made materially false statements to induce bank teller to cash check payable to five different parties where check only contained three parties' endorsements).

(20.) Financial Institutions Reform, Recovery and Enforcement Act of 1989, Pub. L. No. 101-73, 103 Stat. 500 (codified as amended in scattered sections of 18 U.S.C.).

(21.) Crime Control Act of 1990, Pub. L. No. 101-647, 104 Stat. 4789 (codified as amended in scattered sections of 18 U.S.C.).

(22.) For a discussion of the money laundering statutes, see the MONEY LAUNDERING article in this Issue.

(23.) See United States v. Rasco, 853 F.2d 501,503 n.1 (7th Cir. 1988) (dismissing bank fraud indictment under [section] 1344 prior to trial for attempted bribery to induce bank official to launder checks drawn on Bahamian bank account). See generally 18 U.S.C. [section] 215 (2000).

(24.) See infra notes 72-79 and accompanying text (discussing requirement that financial institution be "victim" of offense under [section] 1344).

(25.) E.g., United States v. Laljie, 184 F.3d 180, 189-90 (2d Cir. 1999) (ruling that [section] 1344 does not apply when financial institution is not intended victim of fraudulent enterprise).

(26.) Id. at 190 CA 'pigeon drop' scheme, in which the victim is induced to withdraw money from a bank and entrust it to the defendant, [does not constitute] bank fraud under [section] 1344." (quoting United States v. Blackmon, 839 F.2d 900, 906 (2d Cir. 1988)).

(27.) See 18 U.S.C. [section] 1344(b)(2) (2000); infra notes 80-82 and accompanying text (discussing definition of "custody or control"); United States v. Best, 731 F. Supp. 833, 834-35 (M.D. Tenn. 1990) (dismissing defendants' indictment for conspiracy to commit bank fraud under [section] 1344).

(28.) 18 U.S.C. [section] 1344. See generally EDWARD J. DEVITT, FEDERAL JURY PRACTICE AND INSTRUCTIONS--CRIMINAL [section][section] 40.09, 40.14 (4th ed. 1990 & Supp. 1995) (giving comprehensive overview of elements of bank fraud statute in context of jury instructions).

(29.) See United States v. McCarrick, 294 F.3d 1286 (11th Cir. 2002) (reversing conviction under [section] 1344 because government failed to prove defendant had specific intent to defraud financial institution when loan documents were signed); United States v. Chandler, 98 F.3d 711,716 (2d Cir. 1996) (asserting [section] 1344 requires proof of intent to harm, but permitting such intent to be inferred from exposure to risk of potential loss and further stating intent to deceive is functional equivalent of intent to harm); United States v. Dobbs, 63 F.3d 391,395 (5th Cir. 1995) (requiring "specific intent" to defraud for [section] 1344 conviction); United States v. Brandon, 17 F.3d 409, 425-26 (1st Cir. 1994) (stating intent to defraud must be proved to obtain conviction for bank fraud). But see United States v. Stockheimer, 157 F.3d 1082 (7th Cir. 1998) (rejecting Brandon). See also United States v. Celesia, 945 F.2d 756, 760 (4th Cir. 1991) (finding check-kiting scheme sufficient to show defendants' intent to defraud); cf. JOHN K. VILLA, BANKING CRIMES: FRAUD, MONEY LAUNDERING, AND EMBEZZLEMENT [section] 7.4 (Supp. 2001) (asserting element of acting knowingly is superfluous and thus redundant because acting intentionally is core of every fraudulent act).

(30.) See United States v. Long, 857 F.2d 436, 441 (8th Cir. 1988) (upholding jury instructions that government must prove intent to defraud) (quoting United States v. Graham, 548 F.2d 1302, 1312 (8th Cir. 1977)).

(31.) See United States v. Swinton, 75 F.3d 374, 380 (8th Cir. 1996) ("Intent to defraud.., may be inferred from all the facts and circumstances surrounding the defendant's actions."); United States v. Sayan, 968 F.2d 55, 61 (D.C. Cir. 1992) (using totality of evidence to demonstrate defendant's intent to defraud bank); United States v. Swearingen, 858 F.2d 1555, 1558 (11th Cir. 1988) (affirming conclusion that defendant knowingly attempted to deceive bank through totality of evidence, which included testimony as to purpose, manner, and means of scheme to defraud).

(32.) See United States v. Guyon, 27 F.3d 723, 729 (1st Cir. 1994) (admitting evidence of prior education loan applications for limited purpose of showing intent); United States v. Wicker, 933 F.2d 284, 289 (5th Cir. 1991) (entering evidence of defaulted loans before enactment of [section] 1344 as evidence of intent to defraud); United States v. Campbell, 937 F.2d 404, 407 (8th Cir. 1991) (allowing testimony regarding prior business failure to prove defendant did not act mistakenly).

(33.) See United States v. Renner, 238 F.3d 810, 813 (7th Cir. 2001) (upholding validity of jury instruction which stated, "knowledge may be proved by defendant's conduct, and by all the facts and circumstances surrounding the case," including indifference to truth); United States v. Colon-Munoz, 192 F.3d 210, 224 (1st Cir. 1999) (ruling that government can demonstrate intent through circumstantial evidence, such as involvement of bank insider in procuring transaction without disclosing personal interest in transaction); United States v. Van Brocklin, 115 F.3d 587, 598 (8th Cir. 1997) (finding knowledge requirement satisfied through showing of circumstantial evidence of participation in scheme to defraud bank through loan transactions); Swinton, 75 F.3d at 380 (explaining intent to defraud need not be shown by direct evidence and can be inferred from all facts and circumstances surrounding defendant's actions); Brandon, 17 F.3d at 425 ("It is a well established principle that fraudulent intent may be established by circumstantial evidence and inferences drawn from all the evidence.").

(34.) See United States v. Phath, 144 F.3d 146, 149 (1st Cir. 1998) (rejecting defendant's appeal that jury instruction using "reckless indifference," without warning against conviction based solely on negligence, was harmful error); United States v. Dillman, 15 F.3d 384, 392-93 (5th Cir. 1994) (approving jury instruction defining defendant's knowledge of falsity of statement as "reckless indifference").

(35.) See United States v. Jacobs, 117 F.3d 82, 98 (2d Cir. 1997) (approving jury instruction of "conscious avoidance" in [section] 1344 prosecution concerning creation of fraudulent drafts in debt elimination program); United States v. Pascarella, 84 F.3d 61, 70 (2d Cir. 1996) (approving "conscious avoidance of knowledge" jury instruction under [section] 1344 for depositing checks where defendant consciously avoided knowledge that checks were stolen); United States v. Mancuso, 42 F.3d 836, 846-47 (4th Cir. 1994) (approving jury instruction that "willful blindness" can be used to infer defendant's knowledge of fact).

(36.) See United States v. Celesia, 945 F.2d 756, 758-59 (4th Cir. 1991) (holding bank fraud may be committed by defrauding bank through check-kiting scheme without making false or fraudulent promises required by [section] 1344(2)); United States v. Cloud, 872 F.2d 846, 851 n.5 (9th Cir. 1989) (stating bank fraud statute does not require government show false representations were made knowingly). Instead, the question turns on what the defendant actually knew about the status of the accounts used.

(37.) See United States v. Doherty, 969 F.2d 425, 428 (7th Cir. 1992) (finding [section] 1344(1) requires one need only show "scheme to defraud," which, in check-kiting scheme, hinges on what defendant actually knew about status of accounts used); United States v. Schwartz, 899 F.2d 243, 247 (3d Cir. 1990) (affirming conviction where defendant knew checks were not drawn on sufficient funds, even though defendant made no false or fraudulent representations).

(38.) See United States v. Kenrick, 221 F.3d 19, 26-29 (1st Cir. 2000) (en banc) (holding intent element of bank fraud is intent to deceive bank to obtain something of value, regardless of intent to harm bank); United States v. Barrett, 178 F.3d 643, 648 (2d Cir. 1999) ("[A]ctual or potential loss to the bank is not an element of the crime of bank fraud but merely a description of the required criminal intent."); United States v. Oplinger, 150 F.3d 1061, 1065 (9th Cir. 1998) (maintaining government need not prove bank suffered actual loss or defendant profited from crime if conduct was done with requisite intent). But see United States v. Thomas, 315 F.3d 190, 200 (3d Cir. 2002) ("[H]arm or loss to the bank must be contemplated by the wrongdoer to make out a crime of bank fraud.").

(39.) See United States v. Key, 76 F.3d 350, 353 (11th Cir. 1996) (holding that defendant, who had made false statements on loan application need not know whether victimized bank was federally insured); United States v. Brandon, 17 F.3d 409, 425 (1st Cir. 1994) (finding status of institution to be objective fact and not knowledge element under [section] 1344); see also Biskupic, supra note 6, at 390.

(40.) Biskupic, supra note 6, at 390.

(41.) See 18 U.S.C. [section] 1344 (2000); e.g., United States v. Hooten, 933 F.2d 293 (5th Cir. 1991) (affirming conviction under [section] 1344 for attempt to execute scheme to defraud credit union, despite voluntary termination of scheme before completion).

(42.) See United States v. Taggatz, 831 F.2d 1355, 1361 (7th Cir. 1987) (approving jury instructions which required unanimity for each alternative and sustaining conviction because there was sufficient evidence to convict on either alternative); cf. Griffin v. United States, 502 U.S. 46, 49 (1991) (upholding general jury verdict on multiple-object drug conspiracy indictment so long as it could be supported on one of the grounds).

(43.) 18 U.S.C. [section] 1344.

(44.) See United States v. Hickman, 331 F.3d 439, 446 (5th Cir. 2003) (listing factors (citing United States v. De La Mata, 266 F.3d 1275, 1288 (11th Cir. 2001))); United States v. Anderson, 188 F.3d 886, 889 (7th Cir. 1999) (listing factors (citing United States v. Longfellow, 43 F.3d 318, 323 (7th Cir. 1994))); United States v. Rigas, 281 F. Supp.2d 660, 671 (S.D.N.Y. 2003) (listing factors (citing Anderson, 188 F.3d at 889)).

(45.) See Anderson, 188 F.3d at 889.

(46.) Id. at 890.

(47.) See United States v. Yoon, 128 F.3d 515, 525 (7th Cir. 1997) (holding that the defendant's return of the money after the fraud was irrelevant); United States v. Haddock, 956 F.2d 1534, 1551-52 (10th Cir. 1992) (affirming conviction for using a $250,000 loan contrary to bank agreement, despite fact that loan was eventually repaid), abrogated on other grounds United States v. Wells, 519 U.S. 482 (1997).

(48.) 18 U.S.C. [section] 1344.

(49.) United States v. Colon-Munoz, 192 F.3d 210, 221 (1st Cir. 1999) (quoting United States v. Brandon, 17 F.3d 409, 424 (1st Cir. 1994)); see also Anderson, 188 F.3d at 889 (defining scheme to "include all conduct designed to deceive in order to obtain something of value"); United states v. Hill, 197 F.3d 436, 444 (10th Cir. 1999) (defining scheme to defraud as any design, plan or contrivance designed to defraud); United States v. Johnson, 169 F.3d 569, 572 (8th Cir. 1999) (defining violation of [section] 1344 as scheme which "depart[s] from fundamental honesty, moral uprightness, or fair play and candid dealings in the general life of the community"); United States v. Mueller, 74 F.3d 1152, 1159 (11th Cir. 1996) (stating that courts have been reluctant to create strict definition of fraud "for fear of creating opportunities for, or encouraging the creation of, dishonest schemes that lie outside the definition"); Mare AND WIRE FRAUD article in this issue.

(50.) United States v. Reynolds, 189 F.3d 521, 524 (7th Cir. 1999) (quoting United States v. Pribble, 127 F.3d 583, 587 (7th Cir. 1997)); see also United States v. Heath, 970 F.2d 1397, 1403 (5th Cir. 1992) (quoting Kungys v. United States, 485 U.S. 759, 770 (1988)).

(51.) See United States v. Gregg, 179 F.3d 1312, 1315 (4th Cir. 1999) (ruling that actual reliance is not necessary in determining materiality of false statements so long as such statements were intended to, or had the capacity to, induce reliance); Reynolds, 189 F.3d at 525 (ruling that reliance not an element of proving [section] 1344 violation).

(52.) Neder v. United States, 527 U.S. 1 (1999).

(53.) See Id. at 18 ("[M]ateriality of falsehood is an element of the federal mail fraud, wire fraud, and bank fraud statutes.").

(54.) Id.; see also United States v. Thomas, 315 F.3d 190, 197 (3d Cir. 2002) (applying Neder holding and finding materiality a required element); Reynolds, 189 F.3d at 524-26.

(55.) Gregg, 179 F.3d at 1315 (ruling defendant's statement to bank teller that bank manager had approved deposit of check without requisite endorsements was scheme to obtain monies by false pretenses regardless of whether bank relied on defendant's statement).

(56.) See United States v. Jacobs, 117 F.3d 82 (2d Cir. 1997) (ruling actual loss or exposure to risk of loss is required for bank fraud conviction); United States v. Lemons, 941 F.2d 309 (5th Cir. 1991) (ruling financial institution did not have to experience actual loss for bank fraud indictment, but the institution must at least be exposed to a risk of loss). But see United States v. McNeil, 320 F.3d 1034, 1038-39 (9th Cir. 2003) (finding that legislative history of [section] 1344 suggests Congress did not intend to limit reach of statute only to cases in which bank suffered actual or potential loss).

(57.) See United States v. De La Mata, 266 F.3d 1275, 1298 (11th Cir. 2001) (holding risk of loss is only one way to establish intent to defraud); United States v. Hoglund, 178 F.3d 410, 413 (6th Cir. 1999).

(58.) 18 U.S.C. [section] 1344(1)-(2) (2000).

(59.) See United States v. Crisci, 273 F.3d 235, 239 (2d Cir. 2001) (holding conviction under [section] 1344 requires proof under either subsection); United States v. Dennis, 237 F.3d 1295, 1303 (11th Cir. 2001) ("A conviction can be sustained under either [[section] 1344(1) or [section] 1344(2)] when the indictment ... charge[s] both clauses."); United States v. Barakett, 994 F.2d 1107, 1110 n.10 (5th Cir. 1993) (finding no need to consider [section] 1344(2) because jury found defendant guilty of [section] 1344(1)); United States v. Fontana, 948 F.2d 796, 801 (1st Cir. 1991) (stating [section] 1344's two prongs are disjunctive); United States v. Celesia, 945 F.2d 756, 758-59 (4th Cir. 1991) (finding proof of all elements of both clauses of [section] 1344 is not required if indictment "tracks the language of both provisions").

(60.) See VILLA, supra note 29, at [section] 7.6 (discussing the two distinctions between [section] 1344(1) and [section] 1344(2)).

(61.) See United States v. Bonnett, 877 F.2d 1450, 1457 (10th Cir. 1989) (requiring defendant to be guilty of both scheme to defraud and obtaining property by means of false pretenses for conviction). But see Dennis, 237 F.3d at 1303 (holding that conviction can be sustained under either prong of [section] 1344 when indictment charges violations of both clauses).

(62.) 18 U.S.C. [section] 1341 (2000) and 18 U.S.C. [section] 1343 (2000), respectively.

(63.) See, e.g., United States v. Mueller, 74 F.3d 1152, 1159 (11th Cir. 1996) (relying on mail fraud case to reverse conviction surrounding false statements in context of civil litigation between defendant and bank because situation does not constitute fraud under [section] 1344); United States v. Hammen, 977 F.2d 379, 382 (7th Cir. 1992) (relying on mall fraud cases in reaching [section] 1344 decision).

(64.) See United States v. Colton, 231 F.3d 890, 901 (4th Cir. 2000) (holding that affirmative misrepresentation or disclosure violations are not essential for bank fraud conviction); United States v. Yoon, 128 F.3d 515,522 (7th Cir. 1997) ("For purposes of [section] 1344(1), 'scheme[s] to defraud' ... [are] broadly conceived to include conduct designed to deceive in order to obtain something of value, which.., may or may not include conduct involving false statements or misrepresentations of fact." (quoting United States v. LeDonne, 21 F.3d 1418, 1426 (7th Cir. 1994))).

(65.) See United States v. Sayan, 968 F.2d 55, 61 n.7 (D.C. Cir. 1992) (finding that subsection 1, unlike subsection (2), does not require material misrepresentation and therefore, under [section] 1344(1), check-kiting scheme can support conviction for hank fraud); United States v. Stone, 954 F.2d 1187, 1190 (6th Cir. 1992) (discussing Congressional intent to reach check-kiting under [section] 1344, which was achieved by [section] 1344(1)); United States v. Doherty, 969 F.2d 425,427, 429 (7th Cir. 1992) (finding "bare" check-kiting schemes, where defendant did not communicate to drawee bank, are covered by [section] 1344(1)); see also Biskupic, supra note 6, at 385 (discussing distinction between two subsections in relation to check-kiting schemes).

(66.) 18 U.S.C. [section] 1346 (2000). This statute was enacted by Congress in 1988 in response to the Supreme Court's decision in McNally v. United States, which held that the federal mall fraud statute did not apply to schemes to deprive victims of the right of honest services. McNally v. United States, 483 U.S. 350 (1987). Since that time, circuit courts have upheld the use of [section] 1346 in federal fraud cases. See, e.g., United States v. Pribble, 127 F.3d 583, 591 (7th Cir. 1997) (holding defendant bank officer's nondisclosure of ownership interest in business and other indebtedness in connection with personal loan supported conviction for defrauding bank of honest personal services). While the Second Circuit found [section] 1346 to be unconstitutionally vague as applied in a mall fraud case in United States v. Handakas, 286 F.3d 92 (2d Cir. 2002), it overruled Handakas and found the statute constitutional in United States v. Rybicki, 354 F.3d 124 (2d Cir. 2003) the following year.

(67.) VILLA, supra note 29, at [section] 7.9.

(68.) See United States v. Jenkins, 210 F.3d 884, 886 (8th Cir. 2000) (ruling that depositing credit card slips for fictitious sales, thereby representing that actual sales had taken place, violated [section] 1344(2)); United States v. Lilly, 983 F.2d 300, 302-04 (1st Cir. 1992) (finding use of falsified purchase-and-sale agreements to obtain bank financing violated [section] 1344); United States v. Heath, 970 F.2d 1397, 1403 (5th Cir. 1992) (asserting that falsified real estate appraisal used to secure loan violated bank fraud statute); United States v. Barnhart, 979 F.2d 647, 648-50 (8th Cir. 1992) (finding failure to pay off bank loans as required with proceeds of mortgage sales on secondary market violated [section] 1344); United States v. Bonnett, 877 F.2d 1450, 1454 (10th Cir. 1989) (defining bank employees' conduct in cooperation with customer's check-kiting scheme as misrepresentation in violation of [section] 1344).

(69.) See United States v. Briggs, 965 F.2d 10, 12 (5th Cir. 1992) (holding that implicit representation that defendant acted under employer's authority in ordering wire transfers is false representation within meaning of [section] 1344(2)); Bonnett, 877 F.2d at 1456-57 (finding conduct of bank employees who cooperated in check-kiting scheme by acting as if checks were drawn on collectible funds constitutes misrepresentation in violation of [section] 1344).

(70.) See United States v. Bonallo, 858 F.2d 1427, 1433 (9th Cir. 1988) (refusing to require any misrepresentation actually precede transfer of money, property, or other valuables).

(71.) See Bonnett, 877 F.2d at 1454 (quoting Williams v. United States, 458 U.S. 279, 284 (1982)); see also United States v. Medeles, 916 F.2d 195, 202 (5th Cir. 1990) (stating that knowingly depositing series of insufficiently funded checks does not, by itself, constitute false or fraudulent pretenses). But see United States v. King, 200 F.3d 1207, 1218 (9th Cir. 1999) (ruling that deposit of overdraft check is not false statement under [section] 1344(2), but deceptive conduct related to check, such as telling bank that issuance of check was mistake, brings defendant within reach of statute); United States v. Davis, 989 F.2d 244, 247 (7th Cir. 1993) ("[While] a check is not a representation that the drawer has sufficient funds to cover it, it is a representation that the drawer, bank, etc. exist." (citing Williams, 458 U.S. at 284-85 (1982))).

(72.) See United States v. Lewis, 260 F.3d 855 (8th Cir. 2001) (holding that testimony regarding current federally-insured status of bank is sufficient to infer FDIC insurance on date of fraud); United States v. Pettigrew, 77 F.3d 1500, 1518-19 (5th Cir. 1996) (discussing sufficiency of evidence required to show federally-insured status); United States v. Key, 76 F.3d 350, 353 (11th Cir. 1996) (mandating proof of federally-insured status as prerequisite for successful [section] 1344 claim); United States v. Saks, 964 F.2d 1514, 1518 (5th Cir. 1992) ("[Section] 1344 was 'designed to provide an effective vehicle for the prosecution of frauds in which the victims are financial institutions.'" (quoting S. REP. No. 98-225, at 377 (1983), reprinted in 1984 U.S.C.C.A.N. 3182, 3517)).

(73.) See United States v. Dennis, 237 F.3d 1295, 1304 (11th Cir. 2001) (reversing conviction for bank fraud because fact that targeted bank was national bank does not prove bank was federally insured bank); United States v. Lindsay, 184 F.3d 1138, 1141 (10th Cir. 1999) (reversing bank fraud convictions because government failed to produce evidence that proved targeted institutions were insured by the FDIC).

(74.) 18 U.S.C. [section] 20(l) (2000) defines a financial institution as: (i) an insured depository institution, as defined in section 3(c)(2) of the Federal Deposit Insurance Act; (ii) a credit union with accounts insured by the National Credit Union Share Insurance Fund; (iii) a Federal home loan bank or a member, as defined in section 2 of the Federal Home Loan Bank Act 12 U.S.C. [section] 1422, of the Federal Home Loan Bank System; (iv) a system institution of the Farm Credit System, as defined in section 5.35(3) of the Farm Credit Act of 1971; (v) a small business investment company, as defined in section 103 of the Small Business Investment Act 15 U.S.C. [section] 662; (vi) a depository institution holding company, as defined in section 3(w)(1) of the Federal Deposit Insurance Act; (vii) a Federal Reserve bank or a member bank of the Federal Reserve System; (viii) an organization operating under section 25 or section 25(a) of the Federal Reserve Act; or (ix) a branch or agency of a foreign bank as such terms are defined in paragraphs (1) and (3) of section 1(b) of the International Banking Act of 1978.

(75.) See United States v. Moran, 312 F.3d 480, 489 (1st Cir. 2002) (holding that bank need not be immediate victim nor suffer actual loss to establish violation of [section] 1344); United States v. Laljie, 184 F.3d 180, 189 (2d Cir. 1999) (holding government must prove bank was actual or intended victim, but need not prove bank was immediate victim of fraud).

(76.) See United States v. Brandon, 298 F.3d 307,312 (4th Cir. 2002) (actual loss to bank is not required under [section] 1344); United States v. Everett, 270 F.3d 986 (6th Cir. 2001) (bank fraud statute does not require defendant to put bank at risk of loss in "usual sense" but merely for someone to cause bank to transfer funds "under its possession and control"); United States v. Colton, 231 F.3d 890, 908 (4th Cir. 2000) (stating [section] 1344 requires only that financial institution be exposed to actual or potential risk of loss); United States v. Hoglund, 178 F.3d 410, 413 (6th Cir. 1999) (holding defendant need only have intended to put bank at risk of loss while rejecting defendant's argument that element of bank fraud is exposing bank to risk of loss).

(77.) See United States v. Sammoury, 74 F.3d 1341, 1342, 1346 (D.C. Cir. 1996) (affirming [section] 1344 conviction where charity worker stole over $500,000 worth of donor checks and deposited them in own account); United States v. Morgenstern, 933 F.2d 1108, 1114 (2d Cir. 1991) (stating that defendant's act of diverting funds, in the "custody or control" of a bank, from a third party's account to his own was prohibited by [section] 1344).

(78.) See United States v. Thomas, 315 F.3d 190, 199 (3d Cir. 2002) (holding that [section] 1344 does not reach conduct that solely defrauded customer of bank); Laljie, 184 F.3d at 189-90 (ruling statute requires bank to be actual or intended victim of fraud because purpose of [section] 1344 is to protect federal government's interest as insurer of financial institutions); see also Ellen S. Podgor, Criminal Fraud, 48 AM. U. L. REV. 729, 757 (1999) (discussing inapplicability of bank fraud "where money is merely withdrawn legally from a federally insured bank by a victim and where the bank itself is in no way victimized") (quoting United States v. Blackmon, 839 F.2d 900, 904 (2d Cir. 1988))).

(79.) See Lavin v. United States, 299 F.3d 123 (2d Cir. 2002) (affirming conviction under [section] 1344 for making unauthorized cash withdrawals from ATM); United States v. Miller, 70 F.3d 1353, 1354-55 (D.C. Cir. 1995) (affirming [section] 1344 conviction for using third party's personal identification number (PIN) to remove funds from ATM); United States v. Fadayini, 28 F.3d 1236, 1238-42 (D.C. Cir. 1994) (upholding conviction under [section] 1344 for fraudulent use of ATM).

(80.) See Blackmon, 839 F.2d at 904-07 (reversing [section] 1344 conviction because victim of "pigeon-drop" scheme had legally withdrawn money and thus bank no longer had custody or control of funds during fraud).

(81.) See United States v. Ponec 163 F.3d 486, 489 (8th Cir. 1998) (ruling that even with proper proof of no actual loss to bank, scheme is still a crime if funds involved were under custody or control of financial institution); United States v. Monostra, 125 F.3d 183, 186 (3d Cir. 1997) (rejecting defense that federally insured bank was not subjected to risk because forged cheek was drawn on valid account).

(82.) See United States v. Mancuso, 42 F.3d 836, 845 (4th Cir. 1994) (upholding conviction for defrauding federally insured financial institution of contractual rights to assets).

(83.) See United States v. Mulder, 147 F.3d 703, 707 (8th Cir. 1998) (reversing bank fraud conviction when defendant was not allowed to present evidence probative of the "complete affirmative defense" of good faith); United States v. Pascarella, 84 F.3d 61, 70-71 (2d Cir. 1996) (approving jury instructions that defendant should not be convicted of bank fraud if defendant actually believed checks were not stolen); United States v. Cavin, 39 F.3d 1299, 1309 (5th Cir. 1994) (holding as error jury instruction that acquittal was optional if jury found defendant acted in good faith); United States v Swearingen, 858 F.2d 1555, 1558 (11th Cir. 1988) (sustaining conviction because "evidence is overwhelming that the defendant acted in bad faith").

(84.) See United States v. Sapp, 53 F.3d 1100, 1104 (10th Cir. 1995) (noting good faith is complete defense to bank fraud); Cavin, 39 F.3d at 1309 ("Acquittal ... is mandatory because a finding of good faith precludes a finding of fraudulent intent."); United States v. Ratchford, 942 F.2d 702, 706 n.2 (10th Cir. 1991) (rejecting defendant's argument that jury instructions defining good faith must include caveat that good faith need not be rational or reasonable); see also VILLA, supra note 29, at [section] 7.19.

(85.) See United States v. Stockheimer, 157 F.3d 1082, 1088 (7th Cir. 1998) (holding defendant's belief in the legality of his conduct was not a defense to either mail or bank fraud).

(86.) See United States v. Jacobs, 117 F.3d 82, 98 (2d Cir. 1997) (approving jury instruction that "conscious avoidance" could satisfy knowledge element of [section] 1344); United States v. Strickland, 935 F.2d 822, 826-28 (7th Cir. 1992) (affirming lower court's "ostrich instruction," which allowed jury to infer knowledge from combination of suspicion of wrongdoing, and indifference to truth when defendant claimed he had been duped into bank fraud scheme).

(87.) See United States v. Rackley, 986 F.2d 1357, 1361 (10th Cir. 1993) (rejecting defense that bank directors were aware of circumstances behind fraudulent loan because it "confuses the notion of defrauding a ... bank with the idea of defrauding its owner or directors. It is the financial institution itself ... that is the victim...."); United States v. Saks, 964 F.2d 1514, 1518-19 (5th Cir. 1992) (finding bank customers who took fraudulent loans guilty of bank fraud, despite fact that scheme was bank officers' idea and was executed with their knowledge).

(88.) See United States v. Haddock, 956 F.2d 1534, 1546 (10th Cir. 1992), abrogated on other grounds by United States v. Wells, 519 U.S. 482 (1997). One commentator has vehemently condemned multi-count indictments asserting that "[b]esides creating a double jeopardy situation for the defendant, prosecutors use the threat of piling on [multiple counts] as a big stick to gain guilty pleas." Stephen Pizzo, Lawyers Assess Lemons Impact, NAT'L L.J., Sept. 23, 1991, at 3; see also United States v. Smith, 231 F.3d 800, 815 (11th Cir. 2000) (arguing multiplicitous indictments are problematic because of possibility that defendant might receive multiple sentences for single offense).

(89.) See U.S. CONST. amend. V; United States v. Colton, 231 F.3d 890, 908-09 (4th Cir. 2000) ("Section 1344 authorizes prosecution for each execution of a scheme to defraud, not each act in furtherance of such a scheme."); United States v. Molinaro 11 F.3d 853, 860 (9th Cir. 1993) ("[T]he unit of the offense ... is not each act in furtherance of a scheme to defraud but each execution or attempted execution of the scheme to defraud."); United States v. Lemons, 941 F.2d 309, 318-19 (5th Cir. 1991) (holding each act in furtherance of scheme to defraud constitutes only one execution and thus, only one indictment).

(90.) See United States v. Fraza, 106 F.3d 1050, 1053-54 (1st Cir. 1997) (holding that charges under [section][section] 1014 and 1344 were not multiplicitous because each count required proof of different elements); United States v. Puerta, 38 F.3d 34, 42 (1st Cir. 1994) (finding that indictment charging defendant with violating 18 U.S.C. [section][section] 2314 and 1344 was not multiplicitous); United States v. Henderson, 19 F.3d 917, 926 (5th Cir. 1994) (ruling charges of violating 18 U.S.C. [section] 656 (misapplication of bank funds), [section] 1005 (making false entry), and [section] 1344 did not place defendant in double jeopardy).

(91.) See United States v. De La Mata, 266 F.3d 1275, 1287 (11th Cir. 2001) ("The unit of the offense created by [section] 1344 is each execution or attempted execution of the scheme to defraud, not each act in furtherance thereof."); United States v. King, 200 F.3d 1207, 1213 (9th Cir. 1999) (asserting each execution of scheme is punishable as separate count); United States v. Harris, 79 F.3d 223, 232 (2d Cir. 1996) (stating agreement with other circuits that language of [section] 1344 punishes execution of fraudulent scheme); United States v. Bruce, 89 F.3d 886, 889 (D.C. Cir. 1996) ("it is settled law that acts in furtherance of the scheme cannot be charged as separate counts unless they constitute separate executions of the scheme.").

(92.) See United States v. Mancuso, 799 F. Supp. 567, 570 (E.D.N.C. 1992) (indicating issue in each case is what constitutes execution of scheme). See generally Brian E Perry, "Execution" of a Scheme to Defraud, An Indictment of the Bank Fraud Statute: United States v. Lemons, 941 F.2d 309 (5th Cir. 1991), 61 U. CIN. L. REV. 745, 765-66 (1992) (discussing how different circuits have answered question of what constitutes execution of scheme).

(93.) See Mancuso, 799 F. Supp. at 570 (stating case law indicates definition of "execution" is somewhat obscure).

(94.) See Molinaro, 11 F.3d at 860 (noting question depends upon particular facts of each case).

(95.) See United States v. Mancuso, 42 F.3d 836 (4th Cir. 1994) (allowing separate charges of bank fraud for each individual check deposited in loan fraud scheme); United States v. Poliak, 823 F.2d 371,372 (9th Cir. 1987) (holding each of ten checks deposited in check-kiting scheme chargeable as separate "execution," using examination of mail and wire fraud statutes for support).

(96.) See United States v. King, 200 F.3d 1207, 1213 (9th Cir. 1999) (explaining each execution of a crime need not give rise to a separate indictment); United States v. Lemons, 941 F.2d 309, 318 (5th Cir. 1991) (ruling each act to move funds to defendant, though they took place in separate states, were part of one execution of fraudulent scheme and supporting its reading of [section] 1344 by noting that otherwise, the reach of [section] 1344 would be boundless).

(97.) See Biskupic, supra note 6, at 400-03 (discussing how proposed changes to statute will simplify litigation surrounding [section] 1344).

(98.) See, e.g., United States v. De La Mata, 266 F.3d 1275, 1287 (11th Cir. 2001) (finding that single scheme can be executed number of times); United States v. Colton, 231 F.3d 890, 909 (4th Cir. 2000) (noting that, while [section] 1344 authorizes prosecution for each execution of scheme to defraud financial institution, single scheme can be executed number of times); United States v. Chacko, 169 F.3d 140, 148 (2d Cir. 1999) (holding indictment charging defendant with bank fraud and making false statements to financial institution was not multiplicitous so long as each charged offense contains element not listed in other charged offense); United States v. Fraza, 106 F.3d 1050, 1053-54 (1st Cir. 1997) (finding lack of multiplicity when defendant charged under [section][section] 1014 (making false statements to federally insured lending institution) and 1344 because 1344 contains elements not present in 1014); United States v. Bruce, 89 F.3d 886, 889 (D.C. Cir. 1996) (asserting that each execution of fraudulent scheme is punishable by separate count); United States v. Swinton, 75 F.3d 374, 378-79 (8th Cir. 1996) (concluding single scheme involving misrepresentations on loan applications sustained seven separate charges of bank fraud); United States v. Longfellow, 43 F.3d 318, 323 (7th Cir. 1994) (finding that a single scheme to defraud can