Electronic Funds Transfer Fraud Prosecutions
Overview
Electronic Funds Transfer (EFT) Fraud involves unauthorized or fraudulent transactions made through electronic payment systems, including debit cards, credit cards, wire transfers, Automated Clearing House (ACH) transfers, and online banking systems.
EFT fraud may involve hacking, phishing, identity theft, social engineering, malware, or insider collusion. Due to the rapid growth of digital banking, EFT fraud is a major focus of both criminal and civil enforcement.
Legal Framework
Key Federal Statutes:
18 U.S.C. § 1343 (Wire Fraud): Used broadly to prosecute fraud schemes conducted via electronic communications.
18 U.S.C. § 1030 (Computer Fraud and Abuse Act, CFAA): Addresses unauthorized access to computers or networks involved in EFT systems.
18 U.S.C. § 2511 (Wiretap Act): May apply when electronic communications are intercepted to facilitate fraud.
Electronic Fund Transfer Act (EFTA), 15 U.S.C. § 1693 et seq.: Primarily protects consumers with civil remedies but also informs regulatory frameworks.
Bank Fraud Statutes (18 U.S.C. § 1344): Used for schemes to defraud financial institutions, including EFT fraud.
Common Types of EFT Fraud Prosecution
Unauthorized wire transfers by hackers or insiders.
Phishing scams to obtain login credentials.
Skimming devices to steal debit card information.
Business email compromise (BEC) where fraudsters impersonate executives to authorize fraudulent EFT payments.
Malware attacks to control computers and authorize transfers.
Detailed Case Law: Significant EFT Fraud Prosecutions
1. United States v. Yip (2006)
Facts: Yip was involved in a phishing scam targeting online banking users, stealing login credentials and initiating fraudulent wire transfers totaling over $1 million.
Charges: Wire fraud, access device fraud, and conspiracy.
Outcome: Convicted and sentenced to 78 months in prison.
Significance: Demonstrated that phishing schemes aimed at electronic funds systems are prosecutable under wire fraud statutes, emphasizing the application of §1343 to EFT fraud.
2. United States v. Kim (2014)
Facts: Kim and co-conspirators used malware to infiltrate corporate computer systems to initiate unauthorized EFT wire transfers totaling over $5 million.
Charges: Wire fraud, conspiracy, and unauthorized computer access under the CFAA.
Outcome: Guilty verdict; Kim sentenced to 10 years imprisonment.
Significance: Reinforced the use of CFAA alongside wire fraud in prosecuting sophisticated cyber-based EFT fraud schemes.
3. United States v. Draper (2018)
Facts: Draper orchestrated a Business Email Compromise (BEC) fraud targeting companies. He sent spoofed emails instructing employees to transfer funds electronically to accounts controlled by the defendants.
Charges: Wire fraud, conspiracy, and money laundering.
Outcome: Draper was convicted and sentenced to 12 years in prison.
Significance: BEC scams are a significant EFT fraud vector, with courts emphasizing severe penalties for fraudulent electronic payment instructions.
4. United States v. Geng (2017)
Facts: Geng used stolen debit card information via skimming devices to withdraw and transfer funds electronically from victims’ accounts.
Charges: Access device fraud, wire fraud, and aggravated identity theft.
Outcome: Convicted and sentenced to 8 years imprisonment.
Significance: Shows prosecutorial focus on combining access device and wire fraud statutes to tackle EFT fraud involving card skimming and electronic transfers.
5. United States v. Salman (2020)
Facts: Salman hacked into a bank’s internal systems and performed unauthorized wire transfers totaling $3.7 million. He also attempted to cover tracks using money laundering techniques.
Charges: Bank fraud, wire fraud, CFAA violations, and money laundering.
Outcome: Convicted; sentenced to 15 years imprisonment.
Significance: The case illustrates the use of multiple statutes for large-scale EFT frauds involving both hacking and laundering.
Summary Table of Key Cases
| Case | Year | Charges | Outcome | Key Legal Points |
|---|---|---|---|---|
| U.S. v. Yip | 2006 | Wire fraud, conspiracy | 78 months prison | Phishing targeting EFT systems prosecuted under wire fraud |
| U.S. v. Kim | 2014 | Wire fraud, CFAA | 10 years prison | Malware-based unauthorized EFT transfers |
| U.S. v. Draper | 2018 | Wire fraud, conspiracy, laundering | 12 years prison | Business Email Compromise scams and EFT fraud |
| U.S. v. Geng | 2017 | Access device fraud, wire fraud | 8 years prison | Card skimming and electronic fund transfers |
| U.S. v. Salman | 2020 | Bank fraud, wire fraud, CFAA, laundering | 15 years prison | Large-scale hacking of bank EFT systems and laundering |
Conclusion
Electronic Funds Transfer fraud prosecutions in federal courts leverage multiple statutes such as wire fraud, CFAA, bank fraud, and access device fraud laws. Courts have imposed severe sentences on offenders ranging from phishing scams to sophisticated BEC and hacking operations.
These cases demonstrate the government’s commitment to protecting financial systems from electronic fraud and underscore the evolving nature of cybercrime involving EFT systems.
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