This article provides a detailed overview of the Fraud Enforcement and Recovery Act (FERA). It discusses the FERA’s key guidelines as well as the prohibition it enforces. It also explores the impact FERA has on fraud prosecution. Read on to learn more about the scope of FERA and its significance in fighting fraud.
The US Congress passed the Fraud Enforcement and Recovery Act (FERA) in 2009 in response to the financial crisis and the need for more effective fraud prevention measures. The act provides the federal government with additional resources and capacities to investigate and prosecute financial and other types of fraud. It is an important legislation for protecting the financial system and taxpayers against fraud.
The importance of FERA cannot be overstated. It has allowed the federal government to file various lawsuits against individuals and corporations that have engaged in fraudulent practices, including those involving the housing market, financial institutions, and government contracts. FERA has served as a powerful deterrent to fraudulent behavior by imposing harsh penalties on those who commit fraud.
This article explores the background of FERA, including its key provisions, impact on fraud enforcement, and criticisms.
Background of FERA
FERA (i.e., Fraud Enforcement and Recovery Act) is a federal law that was passed in 2009 to respond to the global financial crisis. It was proposed by Senator Patrick Leahy and co-sponsored by Senators Ted Kaufman, Chuck Grassley, and Arlen Specter. President Barack Obama signed it into law on May 20, 2009, after it received strong bipartisan support in both the Senate and the House of Representatives.
The main purpose of FERA is to enhance the federal government’s ability to investigate and fight fraud in various industries, including financial services, healthcare, and government contracts. It creates new accusations, such as mortgage fraud, and broadens the scope of existing statutes, such as the False Claims Act.
FERA has several significant provisions, including increasing funding for federal law enforcement agencies to investigate and prosecute fraud, the use of wiretaps in financial crime investigations, and the requirement for federal agencies to provide yearly reports on their fraud-fighting activities.
One of the most important provisions of FERA is the expansion of responsibility under the False Claims Act. The False Claims Act allows citizens to sue on behalf of the government against individuals or businesses that commit fraud. False or fraudulent claims made to the government are now punishable by the False Claims Act, regardless of whether they are related to a government contract or program.
In addition, the FERA established additional mortgage fraud offences, including providing false information while applying for a loan and participating in a scheme to defraud a financial institution.
Prohibitions Under FERA
FERA significantly increased the government’s capacity to combat fraud. As one of its key requirements, FERA imposed a wide range of prohibitions on several fraud charges. Here are some of the categories of fraud that are prohibited under FERA:
False Claims Act
The False Claims Act (FCA) prohibits individuals and businesses from making fraudulent claims to gain money from the government. FERA improved the FCA by enlarging the scope of liability, increasing the penalty for infractions, and creating tighter securities for whistleblowers who uncover fraud.
Financial Institution Fraud
FERA also prohibits fraud that involves financial organizations, such as banks and credit unions. This includes crimes such as securities fraud, mortgage fraud, and bank fraud. FERA provides federal prosecutors with more resources to investigate and prosecute these types of crimes.
Securities and Commodities Fraud
FERA expanded the ability of the government to fight securities and commodities fraud by increasing the list of prohibited activities and enforcing more penalties for violators. This includes insider trading, market manipulation, and other unethical practices in trading stocks and commodities.
FERA specifically targets mortgage fraud because it was a major contributor to the 2008 financial crisis. The law forbids several fraudulent practices used in mortgage lending and servicing, such as falsifying loan documents and making false claims about a borrower’s earnings or assets.
Impact of FERA
FERA has had a considerable impact on the enforcement of fraud-related offenses in the United States. Ever since it was passed in 2009, FERA has been used to prosecute different fraud cases, resulting in significant fines and imprisonment for those found guilty of fraud.
One of the most notable impacts of FERA has been its implementation in cases involving financial institutions. FERA expanded the False Claims Act (FCA) to cover fraud against any beneficiary of government funds, including financial institutions. Federal prosecutors can now sue banks and other financial institutions that engage in deceptive activities, such as lying about the quality of mortgages, to get government-backed loans.
Furthermore, FERA has also been applied to commodities and securities fraud, which are illegal financial market manipulations. For instance, FERA was used to convict a group of people who participated in a “pump-and-dump” scam involving the sale of penny stocks. The defendants were eventually convicted of securities fraud and sentenced to lengthy jail terms.
In addition, FERA enforcement proceedings have also focused heavily on mortgage fraud. Different mortgage fraud-related acts are prohibited under the law, including manipulating loan documents, inflating property appraisals, and providing misleading information to lenders. Since the implementation of FERA, the Department of Justice has successfully prosecuted several mortgage fraud cases, resulting in significant fines and jail terms for those found guilty.
More so, FERA has had a huge impact on the enforcement of white-collar crime than it has on specific types of fraud. Individuals found guilty of fraud face harsh fines and punishments, including fines of up to three times the value of the fraudulent action and jail terms of up to 30 years. These penalties have deterred potential fraudsters, thereby preventing fraud before it occurs.
Despite its achievements, FERA has received several criticisms. Some argue that the act has been abused to unfairly target individuals and corporations, resulting in unnecessarily harsh penalties for minor infractions. Others argue that FERA has not gone far enough in holding corporations accountable for fraud and that more needs to be done to hold executives and other high-ranking officials accountable for their actions.
The Fraud Enforcement and Recovery Act (FERA) is an important legislation that has had a considerable impact on American fraud enforcement. Since FERA was formed to address fraudulent activities after the financial crisis, various fraudulent activities across different industries have been prosecuted.
False claims, financial institution fraud, stock and commodity fraud, mortgage fraud, and other sorts of fraud are all prohibited under FERA. The act also protects whistleblowers to encourage people to report fraudulent activities.
FERA’s future remains uncertain because the act could be amended to address some of the criticisms or to enlarge its scope. Nonetheless, FERA remains an important tool for law enforcement organizations in combating fraud, and its consequences will be felt for years to come.