3 ACKNOWLEDGEMENT FICCI is deepy indebted to the Heath Insurance Advisory Group for focussing on Heath Insurance Fraud as one of the areas of intervention. FICCI is especiay thankfu to the Working Group on for having conceptuaized and deveoped the Working Paper in a an extremey short span of time. We are particuary thankfu to the foowing peope for their unreenting and unabated support and co-operation: 1. Ms. Meena Kumari, Joint Director, IRDA 2. Mr Aam Singh, Assistant Managing Director, Miiman 3. Ms Mati Jaswa, Consutant, Project TPA GIPSA 4. Mr Jagbir Sodhi, Director, Swiss Re 5. Dr Somi Nagpa, Senior Heath Speciaist, Word Bank 6. Dr Praneet Kumar, Chairman, Technica Committee, NABH & CEO, BLK Super Speciaty Hospita 7. Dr C H Asrani, Chief Executive, X-Caim 8. Mr Shreeraj Deshpande, Head - Heath Insurance, Future Generai India Insurance Company Ltd 9. Mr Nazeem Khan, VP, ICICI Lombard
5 Content 1. Introduction Defining Fraud & Abuse Managing Fraud (A)Process improvements or modifications (B)Industry Intervention (C)Government or Reguatory Interventions ANNEXURES Annexure A: Indian Pena System Code (IPC) and Indian Contract Act Annexure B: USA Lega Framework Annexure C: Extracts from IRDA Guideines on Fraud Annexure D: Commony use Figures and aert Annexure E: Intimation to insurer or TPA Annexure F: Education Annexure G Defining Leves of Misconduct/fraud and Potentia Responses Annexure H: Medica Counci of India Code of Ethics Annexure I Lega etter sampe
7 FICCI Heath Insurance Working Group Tacking Fraud in Heath Insurance 1.Introduction There is a growing concern among the insurance industry about the increasing incidence of abuse and fraud in heath insurance. FICCI sub group on heath insurance fraud was set up to deiberate upon the issue and come up with a working paper on heath insurance abuse and fraud management for the practitioners within the heath insurance industry and to suggest a framework of best practices. This paper is the resut of sub-groups efforts and deiberations over a short period of 12 weeks. The paper begins with definition of fraud and abuse, different parties invoved in various types of heath insurance fraud, triggers that represent possibe presence of abuse and fraud and the actions that coud be considered at various eves. The paper aso captures the issues concerning inadequate ega provisions and concerning code of conduct for medica practitioners. The ideas presented here can be categorised into one of three broad areas: Category Industry Considerations Time-frame to yied resuts Process improvements or Company specific, no industry Immediate modifications intervention Industry intervention Industry bodies endorsing, with Short/medium-term very itte reguatory or government intervention Government or reguatory Industry intervention insufficient Medium/ong-term intervention aone, reguatory or government intervention required After presentation of this initia working paper and receipt of feedback from wider community of a stakehoders, the FICCI sub group wi consider producing a more forma "white paper", incorporating concepts and further recommendations that are ikey to emerge from expanding the diaogue to more members of the industry, consumer bodies and providers. The aim of the white paper wi be to detai individua company eve actions, potentia industry eve actions and reguatory actions which can impact heath insurance fraud. 01
8 2. Defining Fraud & Abuse It is a matter of concern that 'insurance fraud' is not defined under the Indian Insurance Act. IRDA recenty quoted the definition provided by the Internationa Association of Insurance Supervisors (IAIS) which defines fraud as "an act or omission intended to gain dishonest or unawfu advantage for a party committing the fraud or for other reated parties." Other instruments within the Indian ega system, such as the Indian Pena Code (IPC) or Indian Contract Act, aso do not offer specific aws. Sections of the IPC which dea with issues of frauduent act, forgery, cheating etc. are sometimes appied but none of them are specificay targeted at insurance fraud and are inadequate for purpose of acting as an effective deterrent. In absence of specific aws and harsh punishments, prosecution wi rarey be successfu and if successfu, the penaty inadequate to deter others. As socia heath insurance grows the centra and state governments wi become one of the argest victims of heath insurance fraud and that may be the catayst that eads to the deveopment of a comprehensive ega framework to tacke heath insurance fraud. (More information about IPC, Contract Act and state and federa aws in the USA is presented in Annexure A & B) In simpe parance, insurance fraud can be defined as: The act of making a statement known to be fase and used to induce another party to issue a contract or pay a caim. This act must be wifu and deiberate, invove financia gain, done under fase pretences and is iega. 02 Heathcare fraud as defined by the Nationa Heath Care Anti-Fraud Association (USA): "The deiberate submitta of fase caims to private heath insurance pans and/or tax-funded pubic heath insurance programs." "Intentiona deception or misrepresentation that the individua or entity makes, knowing that the misrepresentation coud resut in some unauthorised benefit to the individua, or the entity, or to another party." Abuse can be defined as practices that are inconsistent with business ethics or medica practices and resut in an unnecessary cost to caims. The biing of services that may not be frauduent, but may be of margina utiity, are inconsistent with acceptabe business and/or medica practices, and are intended for the financia gain of a particuar individua or corporate can be cassified as abuse. Few exampes of common heath insurance abuse woud be - excessive diagnostic tests, extended LoS, conversion of day procedure to overnight admission, admission imited to diagnostic investigations etc.
9 Fraud is wifu and deiberate, invoves financia gain, done under fase pretense and is iega. Abuse generay fais to meet one or more of these criteria, hence the subte difference. Needess to say that the main purpose of both fraud and abuse is financia gain. Parties invoved in heath insurance fraud and types of fraud committed by each IRDA guideines cassify various insurance fraud as under: a) Poicyhoder Fraud and /or Caims Fraud - Fraud against the insurer in the purchase and/or execution of an insurance product, incuding fraud at the time of making a caim. b) Intermediary Fraud - Fraud perpetuated by an intermediary against the insurer and/or poicyhoders. c) Interna Fraud - Fraud / mis-appropriation against the insurer by a staff member. (Seect portions of IRDA circuar are presented in Annexure C) As reevant to heath insurance, the type of fraud committed by customer, intermediary - agent, broker, heathcare provider either individuay or jointy or in connivance with interna staff of insurance company/tpa vary in nature and modus operandi. Commony committed fraud by a customer of heath insurance reate to: conceaing pre-existing disease (PED) / chronic aiment, manipuating pre-poicy heath check-up findings fake / fabricated documents to meet poicy terms conditions, dupicate and infated bis, impersonation, participating in fraud rings, purchasing mutipe poicies, staged accidents and fake disabiity caims, The agents and brokers are usuay invoved in fraud reating to providing fake poicy to customer and siphoning off premium, manipuating pre-poicy heath check-up records, guiding customer to hide PED/materia fact to obtain cover or to fie caim, participating in fraud rings and faciitating poicies in fictitious names, channeising customers to rouge providers fudging data in group heath covers 03
10 Due to the absence of standard medica protocos, no oversight of a reguator, the provider induced fraud and abuse in India forms quite a arge portion of frauduent caims. It woud be quite difficut for a customer to fie a frauduent caim or fake medica documents without connivance of treating doctor or hospita. Provider reated fraud usuay pertain to: Overcharging, infated biing, biing for services not provided Unwarranted procedures, excessive investigations, expensive medicines, Unbunding and up coding Over utiisation, extended ength of stay Fudging records, patient history The empoyees of insurance company / TPA coud aso be invoved in committing fraud by expecting receiving favours / kickbacks, couding with other fraudsters / fraud rings, syphoning premium etc. a) Triggers One of the ways to contro fraud is to estabish triggers / red aerts for eary detection and corresponding action. A ist of commony used triggers and aerts for heath insurance caims are presented in Annexure D. These can be managed automaticay through systems capabiities or manuay detected through inspection of a physica fie. It shoud be noted that the presence of a risk management trigger ony warrants specia attention and further investigation of the caim to coect evidence is required. The exercising of a trigger is not proof of frauduent caim, ony an indication of possibe fraud. 04
11 3. Managing Fraud (A) Process improvements or modifications In this section, methods of identification, mitigation and management of fraud are considered within the context of process improvements or modifications that can be impemented by the insurer. Possibe areas to consider are set out beow. 1) Tee-underwriting or proposa verification ca: this shoud ideay be a centray controed process to ensure that the proposa form contents refect the poicyhoder's understanding and specificay incuding confirmation that no PEDs exist. This shoud be done after a proposa is received but before a poicy is issued. It heps to minimise agent-ed fraud and the use of recorded cas may hep substantiate evidence of fraud at caims stage. In addition, this ca can be utiised to confirm that the poicyhoder fuy understands the benefits and excusions of the poicy. Cost: ow for verification ca Compexity to deveop/administer: medium - agent needs to discose poicyhoder's contact number Working group output: a best practices note which insurers can utiise to create a standardised verification ca process. Underwriting is compex and a very companyspecific process, so no best practice or guideines wi be deveoped for this area 2) Pre-authorisation: this process is a vita component of the heath insurance caims system. It is the first eve check to curb fraud and capabe of eiminating or reducing the ikeihood of its occurrence. However, whether due to an insurer's processes and systems not being robust enough or ack of awareness on the part of customer or provider, this process is often not adhered to in the manner required and the key components of this process which make it effective, need to be impemented propery. a. Pre-authorisation requests for schedued surgeries must be submitted at east 24 hours before admission b. Impementation of the standardised pre-authorisation, discharge summary and biing format must be fast-tracked. 05
12 3) Intimation to insurer or TPA: the first intimation ca to the insurer or TPA is a very rich source of information about the status of the poicyhoder at time of admission. As a resut, this inteigence shoud be used in an optimum manner. The best practice in respect of what information shoud be sought at the intimation stage to mitigate fraud, shoud be documented and distributed. A sampe of the type of information that can be coected at this stage is provided in Annexure E. Cost: ow Compexity to deveop/administer: ow Working group output: A best practices note which insurers can utiise to streamine processes covering caim intimation and pre-authorisation. 4) Expanation of benefits: in some markets, insurers send the poicyhoder a detaied breakdown of what benefits they have paid for. This can be very effective way to check if any impersonation or biing for services not provided had occurred. Cost: ow Compexity to deveop/administer: ow Working group output: a best practice note which insurers can utiise to design a "Benefits Expanation" etter 5) Fraud detection toos and technoogy: insurers in advanced markets depoy robust technoogy and data anaytics processes for detecting outier behavior or for predictive modeing. These function as a kind of eary warning system for detecting fraud. The soutions offered can work in conjunction with existing practices to create a robust framework for eary detection / prevention of fraud. Cost: medium Compexity to deveop / administer: medium Working group output: to encourage and advocate that insurers depoy enabing technoogy 6) Whistebower poicy (company eve): deveop a reporting and rewards system that wi motivate individuas to aert an insurer about individua cases of fraud or systematic fraud. This can be a very attractive mechanism through which the genera popuation can be engaged in the fight against fraud. In addition this is a mechanism for disgrunted co-conspirators to exit a risky situation whist caiming credit for stopping it. 05
13 Cost: ni, ony based on outcome Compexity to deveop/administer: ow Working group output: to encourage and advocate that insurers deveop their whistebower poicy 7) "Name & shame" guideines: (company eve): pubicy discosing names of individuas and institutions invoved in a confirmed case of heath insurance fraud, especiay when a crimina or civi case has aready been fied is an effective way of raising community awareness that insurance fraud wi not be toerated. An interna media poicy about how and what to discose as we as in which situations, can provide vauabe guidance as the time to take such decisions is usuay short. Cost: ni Compexity to deveop/administer: medium, proper ega review of a information reeased is required to avoid accusations of ibe or sander Working group output: to encourage and advocate that insurers deveop their interna poicies (B) Industry Intervention As an industry evoves, certain systematic requirements emerge. These are generay intended to organise and structure the industry and are often best impemented by the industry through a coective body, such as Genera Insurance Counci (GIC) or through a ess forma forum specificay designed for such tasks. In recent few months, Genera Insurance Counci has taken initiative in fraud data sharing among member companies and has aso ooked at cassification, monitoring and deveoping tempates for data sharing; it is work-inprogress at the time of writing this paper. The data sharing shoud aso ead to coective action for effective deterrence, either through GI Counci or the recenty constituted Heath Insurance Forum. Key to the success of coective action wi be backisting / dis-empanement by a of those entities who are proven to induge in fraud and pursuing punitive action, recovery of money. Whie data sharing can be the start point, achievabe in a short time, the industry eve interventions need to be wide and deep for a encompassing impact. Some of the initiatives suggested beow are equay easy to achieve if industry woud set out the task. 07
14 1) Education: fraud can happen inadvertenty and due to ignorance. It is in the industry's interest to create education and awareness coatera that creates awareness about the impact of insurance fraud and its impications. This can be depoyed for a eves of insurance and TPA empoyees. It can incude content for consumer and provider education to create awareness and ensure that individuas are not inadvertenty faciitating fraud. Sampe messaging content is avaiabe in Annexure F. Cost: Low Compexity to deveop/administer: Low Working group output: initia recommendations with sampe content. 2) Contracting: in the absence of appropriate aw on insurance fraud, the industry shoud deveop mode causes for incorporation into poicy contract, in contract with providers, in agency/broker contracts etc. The definition of what constitutes fraud, what penaties and punitive actions woud foow upon confirmation of fraud coud be spet out ceary in the contract and caw back provisions for recovery of money into some of these contracts shoud be expored. 3) Deterrence guideines: industry recommendation on steps and processes an insurer can undertake when fraud is suspected and when it is confirmed. This woud provide a common framework or best practice on how to respond. Refer to Annexure F for different types of fraud/misconduct and corresponding action to be taken. It is to be noted that insurance industry has not made adequate use of Medica Counci of India (MCI) guideines on code of conduct and ethics for medica practitioners. The effective deterrence for medica fraternity can ony come from medica reguator, in the absence of which the good offices of MCI can be utiised. Annexure H provides a ist of MCI provisions which coud be invoked against specific misconduct. 08 Cost: ni Compexity to deveop / administer: ow Working group output: sampe interna deterrence guideines and other content to assist insurers. 4) Benchmarks: the industry coud coaborate with IIB to create benchmarks that individua stakehoders can utiise to obtain better insight into their overa performance. A proven approach in this direction is to aggregate a industry data in
15 a singe data warehouse and then deveop various benchmarks that an individua insurer can compare itsef with. Naturay, these benchmarks need to be deveoped carefuy so that the comparison is on a ike-for-ike basis. Cost: medium (one time and ongoing) Compexity to deveop/administer: medium Working group output: a sma sub-set of the working group can engage with IIB to hep define those benchmarks which the industry requires and which the existing reported data supports. 5) Medica protocos and treatment guideines: the industry shoud advocate for the deveopment and dissemination of independent 3rd party evidence based standard medica protocos and treatment guideines. 6) Provider biing ID and registration porta: a version of this contro mechanism has been very effective in curbing rampant fraud amongst providers of durabe medica equipment to Medicare beneficiaries in the US. The Genera Insurance Counci or newy constituted Heath Forum shoud buid a provider registration porta. This porta wi be used by providers to enter their detais (simiar to the one in an empanement form.) After verification of the detais entered by the providers by any one TPA, their detais wi be added to the common database and a unique provider ID wi be issued to the provider. For providers not currenty empaneed by any TPA or insurer, their detais wi need to be verified before issuance of a unique ID. This unique ID (coud be the same as proposed by IRDA) woud aso act as a biing ID and woud be mandatory on a caim forms. In cases of fraud, a provider wi risk osing its biing ID thus incapacitating it from odging any caims. Naturay, the industry woud need to maintain a common and accessibe database which can verify a biing IDs in rea time. Individua doctors aready have a registration ID and the pre-authorisation and caims forms seek this ID. The industry needs to insist that this number be provided for more active profiing of individua doctors. Cost: ow/medium Compexity to deveop/administer: ow Working group output: a sma sub-set of the working group can provide guidance to the entity seected to deveop the provider biing ID and registration porta 09
16 7) Watch ist creation and maintenance: A TPAs and insurers maintain and share their own ists of backisted providers. Some insurers and TPAs share such ists of providers, refer Annexure F. A common isting of these entities by coecting this information from a TPAs and insurers woud benefit the industry as a shared knowedge repository. The deveopment of such a repository woud invove a "onetime" effort to coect existing backists from TPAs and insurers and then compie them into user-friendy format and an "on-going" effort to maintain it. Such a watch ist woud resembe a website with a secure password restricted area which woud contain indexed watch ists of individuas and corporate entities which have previousy defrauded or abused the insurance system. This woud be a centraised resource which insurers and TPA can assess and search and update. The credibiity of the data wi be enhanced by repacing an ad-hoc sharing of individua ists provided between insurers. Cost: ow Compexity to deveop/administer: ow/medium Working group output: a sma sub-set of the working group can provide guidance to the entity seected to deveop the website 8) Fraud investigator training program: a structured training program aong with mandatory examination, as we as continuing education requirements shoud be deveoped for fraud investigators. A fraud investigators must meet a minimum ski set requirement. In addition, there shoud be a mechanism whereby a fraud investigator can be assessed and certified for higher ski eves. This woud create a cadre of professiona and highy skied fraud investigators. It may be desirabe to ensure that these investigators are icensed by the IRDA. Cost: ow Compexity to deveop/administer: ow/medium 10 Working group output: a sma sub-set of the working group can iaise with IRDA or appointed institutions (e.g. NIA, III) to design the syabus of such a training program. The fu content, deivery mechanisms and examination modaities woud then be deveoped by that institution. 9) Whistebower system & rewards: (industry eve): in case of actionabe information about arger and more systematic fraud cases which span across entities, the industry (through IRDA or GIC or the newy formed Heath Insurance Forum) may wish to coordinate a reward program. Modaities of reward programs initiated by insurers as we as other government entities, such as tax or customs departments, might need to be studied.
17 Cost: ni, ony based on outcome Compexity to deveop/administer: medium Working group output: can provide guidance on how to maintain consistency with the whistebower poicies that individua insurers are impementing 10) Capacity and awareness deveopment in poice and prosecution agencies: in conjunction with buiding a cadre of fraud investigators, the industry wi need to invest resources in training poice and pubic prosecutors. Poice officers are not famiiar with intricacies of insurance processes and that can hinder progress in fraud investigations. Simiary, pubic prosecutors need requisite insurance knowedge to effectivey prosecute offenders. A training program for poice economic offence investigators and prosecutors coud be conducted by the same entity tasked with training fraud investigators. 11) Autonomous anti-fraud bureau: industry, reguatory and government bodies shoud support the creation of an independent anti-fraud bureau. Assistance to design organisationa structure, charter, funding mechanisms and operations can be sought from Coaition Against Insurance Fraud (CAIF) and Nationa Heathcare Anti-fraud Association (NHCAA). Focus activities can incude anti-fraud advocacy, pubic awareness, dissemination of best practices, education (e.g. case studies, training), centraised services (e.g. fraud hotine, data warehousing.) (C) Government or Reguatory Interventions 1) Reguatory action against icensed bodies: IRDA's jurisdiction spans insurers, agents, brokers and TPAs. Whie these entities are governed by detaied guideines, reguations and are subjected to reguar inspections/audits by Reguator, the action and penaty upon confirmation of connivance or active invovement in frauduent activity shoud aso be ceary spent out, eading to suspension/revocation of icense. Unfortunatey there is no equivaent reguator for the supervision of providers, which puts the onus on the Heath Forum to take coective action against providers induging in heath insurance fraud. It is aso necessary that MCI and Ministry of Heath pay an active roe in bringing frauduent hospitas and doctors to account. The Heath Forum shoud aso make a concerted effort to address these issues with members from the provider space. 11
18 2) Specific aws against insurance fraud: many countries have very specific aws against insurance fraud and occasionay more specific aws pertaining to socia insurance fraud. The specific aws can contain causes which ensure speedy resoution of cases, thus enhancing the impact of the aw. Since some of the vioators might be icensed entities, IRDA may aso need to review its reguations. 3) Introduction of caw back provisions: insurance fraud aws which contain provisions which enabe an insurer to recover payments, if fraud is proven subsequenty. These have been found to be very effective in other countries. Usuay such "caw back" provisions are imited to a certain time period, i.e. 3 or 5 years. 4) Reguatory requirements for specific anti-fraud units and capabiities in insurers: the icensing and inspection reguations of various insurance reguators aow them to seek detaied information about an insurer's anti-fraud capabiities. Insurers who do not demonstrate adequate safeguards may be fined. The recent guideines by IRDA aso require this (refer Annexure B) a) The corporate governance guideines mandate insurance companies to set up a risk management committee to ay down Risk Management Strategy. b) Discosing the adequacy of systems in pace to safeguard the assets for preventing and detecting fraud and other irreguarities on an annua basis. Further the guideines aso mandate each insurer to have fraud contro poicy approved by Board, to be reviewed annuay. The poicy is supposed to ay framework for fraud management department, cassification of potentia areas of fraud, information sharing mechanism, due diigence etc. 5) Anti-fraud pubic messaging: the reguator and government can coectivey undertake pubic messaging which highights the impact (higher premiums) and consequences (ega action) of insurance fraud. Such campaigns are generay panned as ongoing initiatives which are further enforced by "name & shame" initiatives. IRDA has run number of campaigns on poicy hoder education, insurance iteracy. Anti-fraud awareness campaigns coud form part of IRDA's consumer awareness campaigns. 12
19 ANNEXURES ANNEXURE A Indian Pena System Code (IPC) and Indian Contract Act "Section 23 and 24: utiises the term "wrongfu gain" - whie this may seem reevant, the working group does not fee that reiance on this section is hepfu Section 25: a person is said to act frauduenty if he acts with the intent to defraud but not otherwise. The working group fees this section is stronger than 23 and 24; however compainant shoud be aware that a court may ask the insurer to prove frauduent intent, which is often very difficut. The defendant may maintain it was an oversight, they did not know it was significant, or that someone ese competed the form on their behaf Section 463: reates to forgery and the working group fees that this is reevant for heath insurance fraud. "Whoever makes any fase documents or fase eectronic record or part of a document or eectronic record, with intent to cause damage or injury, to the pubic or to any person, or to support any caim or tite, or to cause any person to part with property, or to enter into any express or impied contract, or with intent to commit fraud or that fraud may be committed, commits forgery." Section 477 A: reates to fasification of accounts. This may be an appicabe section in some cases of heath insurance fraud. "Whoever, being a cerk, officer or servant or empoyed or acting in capacity of a cerk, officer or servant, wifuy and with intent to defraud, destroys, aters, mutiates or fasifies any book, eectronic record, paper, writing], vauabe security or account which beongs to or is in the possession of his empoyer or has been received by him for on behaf of his empoyer or wifuy, and with intent to defraud, makes or abets the making of any fase entry in, or omits or aters or abets the omission or ateration of any materia particuar from or in, any such book, eectronic record, paper, writing] vauabe security or account, sha be punished with imprisonment of either description for a term which may extend to seven years, or with fine, or with both." Appicabiity of Section 17 in The Indian Contract Act, 1872 "Fraud" means and incudes any of the foowing acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto of his agent, or to induce him to enter into the contract:- vthe suggestion, as a fact, of that which is not true, by one who does not beieve it to be true (across entities) vthe active conceament of a fact by one having knowedge or beief of the fact (across entities) va promise made without any intention of performing it (intermediary/ saes staff) vany other act fitted to deceive (across entities) vany such act or omission as the aw speciay decares to be frauduent 13
20 ANNEXURE B USA Lega Framework In the US, heath insurance fraud can be prosecuted under federa aws or state aws. The Heath Insurance Portabiity and Accountabiity Act of 1996 (HIPAA) makes heath care fraud a federa crime. Heath care fraud occurs when anyone knowingy and wifuy executes, or attempts to execute, a scheme to defraud any heath care benefit program in connection with the deivery of or payment for heath care benefits, or obtains any property of the heath care benefit program by fase representations. A person who vioates the statute may be fined, imprisoned up to 10 years, or both. If the fraud resuts in injury to a patient, he may be imprisoned up to 20 years. If death resuts, he may be imprisoned for ife (18 U.S.C. 1347). The statute appies to fraud against private insurance companies and government heath care programs. It aso appies to any insurance program invoving medica payments (e.g. heath insurance, automobie insurance, workers' compensation) (18 U.S.C. 24). HIPAA aso prohibits knowingy and wifuy fasifying, conceaing, or covering up a materia fact; or making a fase statement; or using or making any fase or frauduent document in connection with the deivery of or payment for heath care benefits or services. A person who vioates this aw may be fined, imprisoned up to five years, or both (47 U.S.C. 1035). Fase Caims A person who knowingy presents a frauduent caim to the U.S. government (e.g. Medicare) is fined between $5,000 and $10,000 pus trebe damages (three times the government's osses) under the federa Fase Caims Act (31 U.S.C. 3729). Fase Statements 14 A person who knowingy and wifuy fasifies, conceas, or covers up a materia fact; makes a fase statement; or uses or makes a fase or frauduent statement to a government agency is fined, imprisoned up to five years, or both under the federa Fase Statements to a Government Agency aw (18 U.S.C. 1001). Mai Fraud A person who engages in a scheme to defraud any person that invoves the use of the U.S. mai may be fined, imprisoned up to 20 years, or both. If the attempt to defraud affects a financia institution (e.g. bank or credit union), the person may be fined up to $1,000,000, imprisoned up to 30 years, or both (18 U.S.C. 1341). Maiing a frauduent caim vioates this statute.