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When insurance fraud becomes a federal crime

On Behalf of | May 8, 2024 | White-collar crimes

The insurance business involves much money changing hands, whether it’s a customer paying their premiums or the insurers providing compensation for covered incidents. It’s no wonder, then, that the industry also attracts much fraudulent crime.

Typically, insurance fraud offenses are prosecuted at the state level. However, if a certain fraud scheme affects interstate commerce, it becomes a federal crime. With the rules of engagement dictated by the federal government, the consequences of this offense are more severe than state-level insurance fraud.

When does an offense become a federal crime?

According to federal law, insurance fraud becomes a federal offense when it affect interstate commerce. Specific instances where an insurance fraud case violates federal law include:

  • Misrepresentations: Making false statements or representations in insurance documents that cross state lines or involve interstate transactions
  • Illegal conversions: Embezzling, misappropriating or converting insurance funds from a company that operates in multiple states or engages in interstate business activities
  • Hidden information: intentionally concealing or misrepresenting material facts about insurance transactions involving policyholders, claimants, or insurance companies from different states
  • Fraudulent transactions: Engaging in fraudulent activities related to the sale, solicitation, or negotiation of insurance policies or contracts that involve parties from different states or have an interstate component
  • Participation in schemes: Participating in schemes or conspiracies to defraud insurance companies or policyholders, where the fraudulent activities cross state lines or affect interstate commerce
  • Fake claims: Submitting fraudulent claims or documentation to insurance companies that operate in multiple states or handle policies or claims involving interstate transactions
  • Other financial crimes: Engaging in money laundering or other financial crimes related to the proceeds of insurance fraud schemes that involve interstate activities or transactions

Simply put, the law covers a wide range of fraudulent activities.

The punishments for interstate insurance fraud

The penalties for interstate insurance fraud can be severe, depending on the specific circumstances of the case.

Individuals convicted of the offense can potentially face fines and imprisonment of up to 10 years. The crime becomes even more serious if it jeopardizes an insurer’s safety or financial condition. If the scheme harms an insurer, the offender may potentially face up to 15 years of imprisonment.

Interstate insurance fraud is a serious federal offense that can result in severe penalties, including substantial fines and lengthy prison sentences. If you face charges for the offense, understand that severe penalties await you on top of a lasting criminal record that could ruin your career and opportunities. A legal professional experienced in federal criminal defense may be able to guide you through your case and advise you on your defense options.