Loughrin: what clause (2) requires, and what limits it
Loughrin stole checks from mailboxes, altered them, and used them to buy goods at a Target store, which then presented them to the drawee banks. He argued that § 1344(2) required proof he intended to defraud a bank; he had intended to defraud Target.
The Court disagreed, reading the two clauses disjunctively. “[T]he first clause of § 1344 … includes the requirement that a defendant intend to ‘defraud a financial institution’; indeed, that is § 1344(1)’s whole sum and substance.” To read the second clause as containing the same element “is to disregard what ‘or’ customarily means,” and “would make § 1344’s second clause a mere subset of its first.”
But the Court did not leave clause (2) unbounded, and the limit it identified is the useful part for defense work. “The criminal must acquire (or attempt to acquire) the bank property ‘by means of’ the misrepresentation. That language limits § 1344(2)’s application to cases … in which the misrepresentation has some real connection to a federally insured bank, and thus to the pertinent federal interest.”
The test the Court supplied: “Section 1344(2)’s ‘by means of’ language is satisfied when … the defendant’s false statement is the mechanism naturally inducing a bank (or custodian of bank property) to part with money in its control.” A forged check presented to a merchant qualifies, because “a merchant accepts a check only to pass it along to a bank for payment; and upon receipt from the merchant, that check triggers the disbursement of bank funds just as if presented by the fraudster himself.”
Where that leaves ordinary commercial fraud. The Court gave the counter-example itself: a fraudster who lies to a victim and receives payment by a genuine check has not committed bank fraud, because the lie never reached the bank and the check was not false. The bank was a payment mechanism, not the object of anything. That distinction is what prevents § 1344(2) from federalising every consumer fraud in which someone paid by check, and it is the argument to make where the government’s theory is that a bank was somewhere in the transaction chain.
The Court also rejected the argument that clause (2) requires a risk of loss to the bank: “nothing like that element appears in the clause’s text.”
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Shaw: what clause (1) requires
Shaw obtained funds from a bank customer’s deposit account. He argued that he had intended to cheat only the depositor, not the bank.
The Court held that clause (1) “covers schemes to deprive a bank of money in a customer’s deposit account,” for three connected reasons.
The bank has a property interest in deposits. “When a customer deposits funds, the bank ordinarily becomes the owner of the funds, which the bank has a right to use as a source of loans that help the bank earn profits.” Even where the contract leaves ownership with the customer, “the bank has a property interest in the funds because its role is akin to that of a bailee.”
No loss, and no intent to cause loss, is required. The statute, “while insisting upon ‘a scheme to defraud,’ demands neither a showing that the bank suffered ultimate financial loss nor a showing that the defendant intended to cause such loss.”
Ignorance of banking law is no defense. “[T]hat Shaw may have been ignorant of relevant bank-related property law is no defense to criminal prosecution for bank fraud.” It was enough that he knew the bank held the account, made false statements to it, and believed those statements would cause the bank to release funds.
But the mens rea is knowledge, not purpose. This is the defense-side half of Shaw, and it is often left out. The Court rejected the argument that the government must prove harming the bank was the defendant’s “conscious object,” holding that a statute making criminal the “knowin[g] execut[ion of] a scheme … to defraud” does not require “something more than knowledge.” That cuts both ways: the government need not prove purpose, but it must still prove the defendant knew he would likely harm the bank’s property interest. And the Court agreed with both parties that “the scheme must be one to deceive the bank and deprive it of something of value” — deception and deprivation.
What counts as a “financial institution”
Everything in § 1344 — the thirty-year maximum, the ten-year limitations period, the jurisdictional hook — turns on a defined term, and the definition is broader than “bank.”
18 U.S.C. § 20 provides that “[a]s used in this title, the term ‘financial institution’ means” ten categories:
- an insured depository institution, as defined in section 3(c)(2) of the Federal Deposit Insurance Act;
- a credit union with accounts insured by the National Credit Union Share Insurance Fund;
- a Federal home loan bank, or a member of the Federal home loan bank system;
- a System institution of the Farm Credit System;
- a small business investment company;
- a depository institution holding company;
- a Federal Reserve bank or a member bank of the Federal Reserve System;
- an organization operating under section 25 or 25(a) of the Federal Reserve Act;
- a branch or agency of a foreign bank; and
- a mortgage lending business as defined in 18 U.S.C. § 27, “or any person or entity that makes in whole or in part a federally related mortgage loan as defined in section 3 of the Real Estate Settlement Procedures Act of 1974.”
The tenth category is the one that matters most in practice. It was added to reach non-bank mortgage originators, and it means that a scheme involving a mortgage lender that is not a bank at all still falls within § 1344, § 1014’s related provisions, and the ten-year limitations period. It is also worth checking rather than assuming: whether a particular entity in a particular transaction satisfies § 20 is an element, and lenders that are neither insured depository institutions nor makers of federally related mortgage loans are outside it.
Check kiting
The classic clause (1) case is check kiting — writing checks between accounts at different institutions to exploit the float, creating apparent balances that do not exist. It fits § 1344(1) because the deception is aimed at the bank itself and the property taken is the bank’s own funds advanced against uncollected deposits. Loughrin noted in passing that appellate courts have generally treated kiting as a clause (1) rather than a clause (2) case. The defense in these matters is usually intent: whether the account holder understood the float as a form of short-term credit the bank tolerated, or as a deception, and what the bank’s own practices communicated.
Mortgage fraud: how it is actually charged
Mortgage fraud is not a separate offense. It is bank fraud, wire fraud and false statements, charged together.
The typical indictment pairs § 1344 with 18 U.S.C. § 1014, which reaches whoever “knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way the action of” an enumerated list of federally connected lenders and agencies — including “any institution the accounts of which are insured by the Federal Deposit Insurance Corporation,” a Federal credit union, an insured State-chartered credit union, a Federal home loan bank, and the Federal Housing Administration.
Section 1014 is attractive to prosecutors for a specific reason: it requires a knowingly false statement made for the purpose of influencing the institution’s action, but not a completed scheme, and not a loss. A single false line on a loan application can complete it. Like § 1344, it carries a ten-year limitations period under § 3293.
Fraud for profit and fraud for housing
The distinction matters more to sentencing and charging discretion than to elements, but it is real and it shapes how a case is defended.
Fraud for profit is organized: straw buyers, inflated appraisals, silent second mortgages, flipped properties, and participants — loan officers, appraisers, closing agents, recruiters — who profit from the transaction itself rather than from living in the house. These are the cases that produce multi-defendant indictments, wire fraud counts on every transmission, and money laundering counts on the distribution of proceeds.
Fraud for housing is a borrower who misstates income, employment, occupancy or the source of a down payment in order to buy a home he intends to live in and intends to pay for. The conduct still satisfies the elements. But the loss analysis is different — a performing loan on an owner-occupied property may generate little or no actual loss — and the § 3553(a) considerations are different in kind from those in a profit-driven scheme. Where the government’s loss figure is built on the face amount of loans that were performing, or on properties whose value covered the debt, the calculation is contestable, and credits against loss matter.
PPP and COVID-relief loan fraud
Pandemic-relief prosecutions remain active, and the limitations picture is not the ordinary one.
The elements
A false PPP or EIDL application is typically charged as some combination of:
- 18 U.S.C. § 1344 — bank fraud, where a PPP loan was made through a participating lender;
- 18 U.S.C. § 1343 — wire fraud, on the electronic application and the disbursement. Note that § 1343’s maximum rises to 30 years where the offense relates to “a presidentially declared major disaster or emergency,” which is why pandemic-relief wire fraud counts carry thirty rather than twenty years;
- 18 U.S.C. § 1014 — false statements to a federally insured lender;
- 15 U.S.C. § 645(a) — the Small Business Act offense, reaching whoever “makes any statement knowing it to be false … for the purpose of obtaining for himself or for any applicant any loan,” or “for the purpose of influencing in any way the action of the Administration.” Two years maximum, which makes it a possible resolution charge rather than a lead count;
- 18 U.S.C. § 1957 — where proceeds above $10,000 were moved through a bank account, which in these cases they invariably were.
The ten-year limitations extensions
Both Acts were signed on 5 August 2022 and both use the same operative formula.
| Program | Statute of limitations | Source |
|---|---|---|
| PPP first-draw loans (Small Business Act § 7(a)(36)) | 10 years from commission | PPP and Bank Fraud Enforcement Harmonization Act of 2022, Pub. L. No. 117-166 § 2(a) |
| PPP second-draw loans (§ 7(a)(37)) | 10 years | Pub. L. No. 117-166 § 2(b) |
| COVID-19 EIDL loans (Small Business Act § 7(b)) | 10 years | COVID-19 EIDL Fraud Statute of Limitations Act of 2022, Pub. L. No. 117-165 § 2(a) |
| EIDL advances (CARES Act § 1110(e)) | 10 years | Pub. L. No. 117-165 § 2(b) |
| Targeted EIDL Advances (Economic Aid Act § 331) | 10 years | Pub. L. No. 117-165 § 2(c) |
Table: the pandemic-relief limitations extensions, both enacted 5 August 2022. Each provision is framed “[n]otwithstanding any other provision of law” and reaches criminal charges and civil enforcement actions alleging that a borrower engaged in fraud.
Three qualifications belong with that table, and stating them is the point of getting this right rather than repeating a headline.
They reach borrower fraud. Each provision is written in terms of “a borrower [who] engaged in fraud.” Conduct by lenders, agents and facilitators is not obviously within the extension, and would fall back on the ordinary periods — five years generally under § 3282(a), ten under § 3293 where a financial institution is affected.
Retroactivity is not addressed on the face of either Act. Neither statute states whether the ten-year period applies to offenses committed before 5 August 2022. Because most PPP conduct occurred in 2020 and 2021, and the ordinary five-year period on 2020 conduct would have expired in 2025, this is not an academic question. It is a live issue rather than a settled rule, and any page telling you flatly that all PPP fraud carries ten years is overstating what the statutes say.
A ten-year period on the PPP loan does not extend an unrelated count. The limitations analysis is charge-by-charge. A wire fraud count arising from conduct outside the program is governed by § 3282 or § 3293, not by the Small Business Act amendments.
The count that adds two years: aggravated identity theft
A bank or mortgage fraud indictment frequently carries a count under 18 U.S.C. § 1028A, aggravated identity theft, which imposes a two-year term that must run consecutively to the sentence on the underlying offense. That consecutive term is not subject to the guideline calculation and cannot be reduced by the factors that mitigate the fraud count, which is why it is the single most consequential add-on count in these cases.
The Supreme Court narrowed it substantially in Dubin v. United States, 599 U.S. 110 (2023). Under § 1028A(a)(1), the Court held, “a defendant ‘uses’ another person’s means of identification ‘in relation to’ a predicate offense when the use is at the crux of what makes the conduct criminal” — not “merely an ancillary feature of a billing method.”
The distinction the Court drew is usable and clear: “identity theft is committed when a defendant uses the means of identification itself to defraud or deceive,” so that “this deception goes to ‘who’ is involved, rather than just ‘how’ or ‘when’ services were provided.”
This matters far beyond the loan context: the same who versus how line governs § 1028A counts appended to health care billing prosecutions, which is the fact pattern Dubin itself involved. Applied to a loan case, the line falls roughly here. Submitting an application in another person’s name, or using a straw borrower’s identity to obtain credit, goes to who — the identity is the deception, and § 1028A applies. Overstating income or misdescribing occupancy on an application submitted in the applicant’s own real name goes to how much or how, and after Dubin is a much weaker fit, because the borrower’s own name is an ancillary feature of the application rather than the crux of the fraud. Where the government has appended a § 1028A count to a fraud that is really about numbers rather than identity, Dubin is the answer, and it is worth two years.
Where bank fraud cases are actually defended
The “by means of” element. After Loughrin, the question in a clause (2) case is whether the false statement was “the mechanism naturally inducing a bank … to part with money in its control.” Where the bank was a conduit for payment and the deception was directed elsewhere, the element is genuinely contested.
Deception and deprivation. Shaw confirms that clause (1) requires a scheme “to deceive the bank and deprive it of something of value.” A misstatement that did not deceive the institution — because the institution knew the facts, or because the statement was immaterial to its decision — does not satisfy it. Materiality is an element of § 1344 under Neder v. United States, 527 U.S. 1, 25 (1999).
Intent at the time of application. In mortgage and PPP cases the state of mind that matters is the applicant’s at the moment of application, not what happened to the business afterwards. A business that genuinely intended to retain employees and then could not is in a different position from one that never had them, and the contemporaneous records — payroll files, bank statements, tax filings — are where that is shown.
Reliance on a broker or agent. Very many PPP and mortgage applications were prepared by third parties, some of whom inflated figures without the applicant’s knowledge, and some of whom took a percentage. Who supplied which number is a factual question the government often has not fully answered.
Loss. The guideline calculation under U.S.S.G. § 2B1.1 turns on the loss figure. In loan cases, credits against loss — collateral value, amounts repaid, the value of forgiven principal actually spent on payroll — are frequently omitted from the government’s initial computation, and the difference between face amount and net loss can be several offense levels. Our white collar crime lawyer hub sets out the loss table and what Amendment 836 changed about how mitigation must now be framed.
The financial-institution element. Because the thirty-year maximum and the ten-year limitations period both turn on a financial institution being affected, and because the Fourth Circuit has held that question to be an offense element that must be charged and proved, it is worth testing whether the institution was a victim or merely a conduit. The competing circuit approaches are set out on our wire fraud lawyer page.
The counts that come with it. A § 1344 indictment is rarely a single count. Loan proceeds moved between accounts generate money laundering exposure; proceeds not reported generate tax exposure; funds taken from an employer to service the loan generate embezzlement counts. Where the borrower was a public company or a fund, the same application can generate securities fraud counts and a parallel SEC investigation; where investor money was used to service earlier obligations, the government characterizes the whole arrangement as a Ponzi scheme. And where the borrower is a medical practice, a loan application overstating patient revenue can sit alongside health care fraud, Medicare and False Claims Act counts drawn from the same books.
Where a conviction has already been entered, direct review runs through federal appeals, and claims resting on facts outside the record run through a § 2255 motion. Guideline calculation and § 3553(a) advocacy are covered in our federal sentencing pages. Elizabeth Franklin-Best, P.C. is a federal criminal defense attorney practice handling federal bank, mortgage and pandemic-relief fraud matters nationwide.
Frequently Asked Questions About Bank Fraud Charges
What is bank fraud under federal law?
18 U.S.C. § 1344 makes it a crime to knowingly execute or attempt to execute a scheme either to defraud a financial institution, or to obtain money or property owned by or in the custody or control of a financial institution by means of false or fraudulent pretenses. The maximum is 30 years and a $1,000,000 fine, and the limitations period is ten years rather than the usual five.
Do I have to have intended to defraud the bank itself?
Not under clause (2). Loughrin v. United States, 573 U.S. 351 (2014), holds that “§ 1344(2) does not require the Government to prove that a defendant intended to defraud a financial institution.” What clause (2) does require is that the property be obtained “by means of” the misrepresentation — meaning the false statement was “the mechanism naturally inducing a bank … to part with money in its control.” Clause (1), by contrast, does require intent to defraud the institution.
Does the bank have to lose money?
No. Shaw v. United States, 580 U.S. 63 (2016), holds that the statute “demands neither a showing that the bank suffered ultimate financial loss nor a showing that the defendant intended to cause such loss.” Loughrin similarly rejected a risk-of-loss requirement under clause (2). Loss matters enormously to the sentence; it is not an element.
If I defrauded a customer rather than a bank, is that still bank fraud?
It can be. Shaw holds that a scheme to obtain funds from a customer’s deposit account is a scheme against the bank, because “[w]hen a customer deposits funds, the bank ordinarily becomes the owner of the funds,” and even where the customer retains ownership the bank’s role “is akin to that of a bailee.” The Court also held that being ignorant of that property law “is no defense.”
Is mortgage fraud a separate crime?
No. It is charged under the general statutes — § 1344 bank fraud, § 1343 wire fraud, and § 1014 for false statements made to influence a federally insured lender or a listed federal agency. Section 1014 requires no completed scheme and no loss: a knowingly false statement made to influence the institution’s action completes it.
What is the statute of limitations for PPP loan fraud?
For borrower fraud on a PPP loan, ten years — the PPP and Bank Fraud Enforcement Harmonization Act of 2022, Pub. L. No. 117-166, provides that “any criminal charge or civil enforcement action alleging that a borrower engaged in fraud with respect to a covered loan … shall be filed not later than 10 years after the offense was committed.” A parallel Act, Pub. L. No. 117-165, does the same for COVID-19 EIDL loans and advances. Both were signed on 5 August 2022. Neither states on its face whether the extension applies to offenses committed before that date, and neither expressly reaches conduct by lenders or facilitators rather than borrowers.
Are PPP cases still being brought?
Yes. With ten-year periods on borrower fraud, conduct from 2020 and 2021 remains chargeable well into the 2030s if the extensions apply. Whether they apply to a particular case is a real question, and it is one worth raising early rather than assuming.
How much prison time does bank fraud carry?
The statutory maximum is 30 years per count with a $1,000,000 fine — higher than ordinary wire fraud. The sentence actually imposed is driven by the advisory guideline range under U.S.S.G. § 2B1.1, which turns primarily on loss, the number of victims, and enhancements such as sophisticated means and abuse of trust, together with the 18 U.S.C. § 3553(a) factors. We do not estimate ranges for individual cases.
Why is the limitations period ten years instead of five?
Because 18 U.S.C. § 3293 singles out financial-institution offenses. It provides that no person shall be prosecuted for a violation of § 1344, § 656, § 1014 and the other listed provisions — or of §§ 1341 or 1343 “if the offense affects a financial institution” — “unless the indictment is returned or the information is filed within 10 years after the commission of the offense.”
Does a mortgage company count as a “financial institution”?
Often, yes. 18 U.S.C. § 20 defines the term for all of Title 18, and its tenth category covers “a mortgage lending business (as defined in section 27 of this title) or any person or entity that makes in whole or in part a federally related mortgage loan as defined in section 3 of the Real Estate Settlement Procedures Act of 1974.” So a scheme involving a non-bank mortgage originator can still be bank fraud, with the thirty-year maximum and the ten-year limitations period. Whether a particular entity falls within § 20 is an element, and it is worth checking rather than conceding.
Why does my indictment have a separate two-year count?
That is almost certainly aggravated identity theft under 18 U.S.C. § 1028A, which imposes a two-year term that runs consecutively to whatever is imposed on the fraud counts. Dubin v. United States, 599 U.S. 110 (2023), narrowed it: the use of another person’s means of identification must be “at the crux of what makes the conduct criminal,” not “merely an ancillary feature of a billing method.” Where the deception went to who was involved, the count fits. Where it went to how much or how — an inflated income figure on an application in the applicant’s own real name — Dubin is a direct challenge.
What is the difference between § 1344 and § 1014?
Section 1344 requires a scheme, executed or attempted. Section 1014 requires only a knowingly false statement, or a willful overvaluation of property or security, made “for the purpose of influencing in any way the action of” a listed institution or agency — with no scheme, no execution and no loss required. A single false entry on a loan application can complete § 1014 while falling short of a § 1344 scheme, which is why the two are charged together.
By Elizabeth Franklin-Best, Esq. — Principal Attorney & Founder, Elizabeth Franklin-Best, P.C.
Charged With Bank Fraud?
Section 1344 carries a thirty-year maximum sentence, a ten-year statute of limitations, and severe exposure. The specific counts charged shape what defense is realistic.
Representation begins with a paid, one-hour consultation — a working session in which we review where matters stand and tell you honestly what options remain. We do not promise outcomes.
Reviewed for legal accuracy by Elizabeth Franklin-Best, Esq., Principal Attorney·September 2026