Federal Financial Instrument Fraud: Felony Credit Card Crimes

Banking is big business around the world but it is particularly important here in Texas, where Governor Abbott recently announced on X that the State of Texas enjoys the 10^th largest economy in the world (yes, the WORLD).  For most of us, Big Banking translates into our checking and savings accounts alongside our credit cards, debit cards, and personal loans (like your car note).

Credit cards are a particularly big part of the banking industry’s revenue.  The latest forecasts project the Credit Cards Payments Market to jump another 5% this year, with industry researchers expecting a steady rise in profits for these products for the next decade.  It’s big money.

Banks and others in the credit card arena are expecting to reap over $1.33 Billion each year in the credit card market by the end of 2033.  Read, “US card payments market to grow by 5% in 2024, forecasts GlobalData,” written by Robert Prendergast and published by Yahoo Finance on June 26, 2024 and “Credit Card Payments Market Size and Growth 2024 to 2033,”  published by Precedence Research in June 2024 Report (No. 4460) (“Precedence Report”).

This is because banks are not the only corporations that are involved in the credit card marketplace.  Other companies also offer and profit from credit cards, offering different kinds of credit cards.  For instance, there are “general purpose credit cards” (the most popular) like Visa or MasterCard.  These cards are accepted all over the place.  There are also “specialty credit cards” (which are a rising trend).  The specialty cards are “… tailored to align the unique demands of a particular group of consumers, including college students and business professionals. Organizations often offer these cards to their employees to keep track of employee expenses on travel, inventory purchases, and various other responsibilities that require transactions.”  For details, see the Precedence Report, and read “Specialty Credit Cards,” published by CU Management on September 9, 2016.

The Precedence Report lists the top credit card payments market companies to include: American Express; Bank of America; Barclays; Capital One; Chase; Citibank; Discover; HSBC; ICICI Bank; JPMorgan; Mastercard; MUFG; Santander; SBI Cards;  State Farm; U.S. Bancorp; Visa; Wells Fargo; Westpac; and Worldpay.

Credit Card Fraud Crimes: Texas and Federal Law

And with all that profit and product popularity, it’s no surprise there is a lot of illegal activity and criminal acts involving all kinds of financial instruments and particularly, credit cards.  In fact, it is reported that 60% of Americans have been victims of credit card fraud and almost half (45%) have had fraudulent charges on their credit cards more than once.  Read, “52 Million Americans Experienced Credit Card Fraud Last Year,” written by Brett Cruz and published by Security.Org on July 26, 2024.

What exactly is credit card fraud? Essentially, credit card fraud happens when some uses a credit card number without permission of its owner.  An actual credit card may be stolen and used.  There may be a fake credit card or phony credit card number using someone’s personal information.  And these things can be used in person, at a store or restaurant, for instance.  Or they can be used online.  Makes no difference: it’s all in violation of the law.

These are crimes defined under both state and federal statute.  Of particular interest are the state and federal laws that define financial instrument fraud and specifically, crimes involving the outlawed use of credit cards.

Texas has its own set of statutes and court case precedent dealing with credit card fraud.  For details regarding arrests, convictions, and sentencing for Texas credit card crimes, read our earlier discussions in: Fraudulent Use or Possession Charges in Texas: Identity Theft and Fake Credit Cards; and Credit Card Fraud and Theft in Texas: Lots of Credit Cards Here in DFW.

Federal Law Perspective:  Financial Instrument Fraud vs Financial Institution Fraud

When considering the federal criminal system, it is important to begin by distinguishing between “financial institution fraud” (“FIF”) and “financial instrument fraud” from the perspective of federal law as well as the Department of Justice, the local AUSAs, and the United States Sentencing Commission (“USSC”).

Banks are entities subject to fraud in various ways.  Credit cards, debit cards, and the like are a type of financial product (instrument) that invite deception with things that a part of the revenue product stream of banks as well as other types of companies and corporations.

Financial Institution Fraud (“FIF”)

Financial institutions that come under federal jurisdiction must have their deposits covered in some manner by federal insurance, such as the Federal Deposit Insurance Corporation (18 U.S.C. § 656) or the National Credit Union Administration (18 U.S.C. § 657).  The Federal Bureau of Investigation (“FBI”) and other federal agencies may build criminal cases from several FIF laws, adding other charges to them as they see fit.  As explained in Section 9-40.000 of the Department of Justice Criminal Manual for the Office of the Attorney General (“DOJ Criminal Manual”),  financial institution fraud indictments can include FIF statutes like:

• Embezzlement, Abstraction, Purloining or Willful Misapplication – 18 U.S.C. §§ 656, 657
• False Statements – 18 U.S.C. § 1014
• False Entries – 18 U.S.C. §§ 1005, 1006
• Bank Fraud – 18 U.S.C. § 1344
• Bank Bribery – 18 U.S.C. §215.

For details, read the FBI’s online discussion of Financial Institution Fraud (discussing mortgage fraud) and our prior article, Financial Institution Fraud (FIF): Criminal Defense Overview.

Federal Credit Card Crimes Involving Financial Instrument Fraud

Financial instrument fraud has its own set of criminal considerations.  From a criminal defense perspective, here in Texas there are many credit card crime arrests made by state law enforcement that go through the state system.

However, credit card fraud is also a defined federal offense and an established federal felony which come with some serious sentencing ramifications since federal convictions involve application of the United States Sentencing Guidelines (“USSG”).

• For more on the USSG, found in the United States Sentencing Manual (Manual) promulgated by the United States Sentencing Commission (USSC), read our earlier articles with examples using the Sentencing Tables in: Federal Crimes and Sentencing Guidelines: Health Care Fraud; Methamphetamine Trafficking and Federal Sentencing; and Loss Amounts In Federal Sentences: Calculating Economic And Financial Losses In Federal Felonies.

Federal Jurisdiction of the Credit Card Activity

For federal credit card fraud arrests, the first question for defense lawyers is if federal jurisdiction has attached to the situation.  The AUSA must have admissible evidence to show that the events involved interstate commerce (going across the Texas state line in some way).  This may be a simple step in today’s world: electronic communications (like an online transaction) are enough to jump this hurdle.

And, most federal investigations are complex investments in both time and money, so establishing federal jurisdiction over the matter usually is clear because there will be several states involved over time, not just Texas, with people working in the fraud operation in a number of locations.  For more on organized criminal enterprises, read:  What are Racketeering Charges?  Organized Crime, Gangs and Cartels, and Overcharging RICO and When Businesses are Charged with Crimes: Organizational Offenders.

18 U.S.C. § 1029

The key federal criminal statute involving financial instrument fraud with credit cards is 18 U.S.C. § 1029.  Under the statute, “access devices” includes credit cards, debit cards, and gift cards.

Here, Congress has made it a crime to do the following:

(1) knowingly and with intent to defraud produces, uses, or traffics in one or more counterfeit access devices;

(2) knowingly and with intent to defraud traffics in or uses one or more unauthorized access devices during any one-year period, and by such conduct obtains anything of value aggregating $1,000 or more during that period;

(3) knowingly and with intent to defraud possesses fifteen or more devices which are counterfeit or unauthorized access devices;

(4) knowingly, and with intent to defraud, produces, traffics in, has control or custody of, or possesses device-making equipment;

(5) knowingly and with intent to defraud effects transactions, with 1 or more access devices issued to another person or persons, to receive payment or any other thing of value during any 1-year period the aggregate value of which is equal to or greater than $1,000;

(6) without the authorization of the issuer of the access device, knowingly and with intent to defraud solicits a person for the purpose of—

(A)offering an access device; or

(B) selling information regarding or an application to obtain an access device;

(7) knowingly and with intent to defraud uses, produces, traffics in, has control or custody of, or possesses a telecommunications instrument that has been modified or altered to obtain unauthorized use of telecommunications services;

(8) knowingly and with intent to defraud uses, produces, traffics in, has control or custody of, or possesses a scanning receiver;

(9) knowingly uses, produces, traffics in, has control or custody of, or possesses hardware or software, knowing it has been configured to insert or modify telecommunication identifying information associated with or contained in a telecommunications instrument so that such instrument may be used to obtain telecommunications service without authorization; or

(10) without the authorization of the credit card system member or its agent, knowingly and with intent to defraud causes or arranges for another person to present to the member or its agent, for payment, 1 or more evidences or records of transactions made by an access device….

18 U.S.C §1028A

In tandem with the above law, AUSAs will likely look for ways to include other felony charges based upon 18 U.S.C §1028A, which defines felony aggravated identity theft.   This makes it a crime under federal law to use, transfer, or possess without lawful authority a means of identification of another person; as stated in its subsection (a)(1):

Whoever, during and in relation to any felony violation enumerated in subsection (c), knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person shall, in addition to the punishment provided for such felony, be sentenced to a term of imprisonment of 2 years.

Related Federal Offenses for Financial Instrument Fraud Credit Card Crimes

As we’ve discussed many times before, experienced federal criminal defense attorneys are well aware that AUSAs look for as many different federal criminal statutes as they can to include in their indictments against someone.  It is the job of the defense lawyer to cull through all these charges and determine their viability, both factually and legally.

In a credit card investigation, the AUSA will look for sufficient evidence (documents, data, witness testimony) that will help them bring in all sorts of additional federal criminal allegations.  Each one brings its own independent count; its own independent need to be proven beyond a reasonable doubt; and its own independent punishment determination or sentence.

Often, defense lawyers will see the basic financial instrument fraud – credit card crime allegations piled together with charges of violating other federal criminal statutes like:

• 18 U.S.C. §1344 – Bank fraud
• 18 U.S.C. §1341 – Mail fraud
• 18 U.S.C. §1956 – Money laundering
• 18 U.S.C. §1343 – Wire fraud.

For more on these allegations, read: Things to Know about Wire Fraud Today: It’s a Big Deal; 10 Things to Know About Mail Fraud Prosecutions; 5 Things to Know About Money Laundering in Texas; and Arrested for Bank Fraud in Texas.

Punishment for Federal Credit Card Crimes – Financial Instrument Fraud

Whether the case goes to trial in federal court or the defense reaches a plea bargain with the AUSA, many of these credit card fraud prosecutions will see the defendants facing a range of punishments that can include not only imprisonment for a significant period of time in a federal facility but also monetary fines and loss of property (e.g., restitution).  Federal defense attorneys will work hard to deal with the USSG considerations in these matters because federal cases are known to come with harsher punishments than similarly situated cases that resolve within the Texas system.

Anyone convicted of violating the basic statute (18 U.S.C. § 1029) faces a defined statutory punishment of 10-20 years in federal prison together with a monetary fine and a judicially determined restitution order.  Forfeiture is allowed pursuant to Section 413 of the Controlled Substances Act (excluding it subsection (d)), according to 18 U.S.C. § 1029(c)(2).

One of the biggest challenges for the defense attorney representing someone in a federal credit card fraud case is working with the AUSA in plea negotiations as well as with the court at the Sentencing Hearing to minimize the punishment under the federal sentencing guidelines.  It does happen.

From the August 2024 USSC Quick Facts release, we know that over half (56.5%) of these credit card fraud cases saw defendants sentenced pursuant to the USSG while a significant number (43.5%) were sentenced under a variance.  Of those sentenced pursuant to the USSG, most got sentences within the guidelines range but almost a third (29.3%) got a substantial assistance departure, with an average sentence reduction of 64.2%. Those receiving a variance saw a 95.6% downward variance with an average reduction of 49.5%.  See, US Sentencing Commission. “Quick facts: Credit Card Fraud.” (2024).

Defenses to Federal Instrument Fraud – Credit Card Crime Charges

Federal criminal defense attorneys have a complicated job to do in any federal instrument fraud – credit card crime case.  First of all, there is the need to go through the federal prosecution’s case, item by item, from both a factual and legal perspective.  Is all the evidence legally admissible? Was there any kind of illegal search and seizure?  Is there federal jurisdiction?

And there must also be an independent investigation into both the facts and the law into the entire matter, to find possible defenses to one or more of the charges.

For instance, as shown above, there is a statutory requirement of knowledge or intent in 18 U.S.C. §1029 (“knowingly”).  Defense investigations may reveal facts that show the defendant did not know the credit card information was false or stolen.  Was it a gift from someone else?  This lack of knowledge is a valid defense.

Others include someone who is forced to take part in a credit card fraud scheme as part of a larger organization and has no choice but to go along.  If the defendant was forced to use the credit card information under duress or threat, then that is another valid defense to the crime.

Texas Criminal Defense of Felony Credit Card Crimes in Federal Court

Having an experienced federal criminal defense lawyer involved in a financial instrument fraud – credit card fraud case is very important.  Usually, these cases are tied together with other felony charges and the potential punishment, taking all the counts together, can be overwhelming and life-changing.   Not all lawyers in Texas are licensed to practice in federal court, and not all Texas attorneys are dedicated to criminal defense. Read, Why You May Need a Federal Criminal Defense Lawyer in Texas.

While Texas credit card fraud matters can involve smaller scenarios, many federal credit-card fraud cases will be the result of extensive law enforcement efforts.  The defendant can expect to face a much bigger and well-financed effort when the federal prosecutors and federal agencies are involved.

Those charged, and their loved ones, are wise to understand the distinct complexities they face upon entering the federal system.  See: How Arrests Happen: From Investigation to Arraignment, Being Charged for a Federal Crime; The Federal Criminal Justice System: After Arrest, From Arraignment to Sentencing; and Categorical Approach: Longer Federal Sentences With Past Convictions.

To learn more on Texas criminal defense of white-collar crimes, read:

• White Collar Crime: Indictments Of Texas Professionals;
• Credit Card Fraud Is Very Profitable and Easy to Do, No Wonder Credit Card Crimes Are Happening All Over the Country;
• Fraudulent Use or Possession Charges in Texas: Identity Theft and Fake Credit Cards.

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For more information, check out our web resources, read Michael Lowe’s Case Results, and read his in-depth articles,” Pre-Arrest Criminal Investigations” and “10 Questions to Ask Before You Hire a Criminal Defense Lawyer.“