Check Kiting: An Overview
Definition:
Key Facts
- Definition: Check kiting is the practice of intentionally writing a check for a value greater than the account balance from one bank account and then writing a check from another account with insufficient funds to cover the first check.
- Purpose: The purpose of check kiting is to falsely inflate the balance of a checking account in order to allow written checks to clear that would otherwise bounce.
- Types of check kiting:
a. Bank Kiting: This involves passing a series of checks at two or more banking institutions, using accounts with insufficient funds. The kiter takes advantage of the float time required for a check deposited at one bank to clear at another, allowing them to withdraw funds before the original check clears.
b. Retail Kiting: This variant involves cashing a bad check at a retailer to purchase an item and then writing another check, sometimes including a cashback payment, before the first check clears. The cash from the second check is then deposited to cover the first check.
c. Circular Kiting: This form of kiting involves using multiple accounts at different banks. The kiter writes a check from one bank to themselves at another bank, creating artificial funds to cover the first check. This cycle repeats until the offender is caught or genuine funds are deposited.
d. Corporate Kiting: This occurs when a corporation engages in kiting by manipulating funds between accounts to create the appearance of sufficient funds. - Consequences: Check kiting is illegal and considered a form of check fraud. Offenders can face criminal charges, including fines and imprisonment, as well as civil penalties.
Check kiting is the fraudulent practice of writing checks from multiple bank accounts with insufficient funds to cover the amounts drawn, exploiting the time lag between check deposits and withdrawals.
Purpose of Check Kiting
The primary purpose of check kiting is to artificially inflate the balance of a checking account, enabling the clearance of checks that would otherwise bounce due to insufficient funds.
Types of Check Kiting
Bank Kiting:
Involves passing bad checks between two or more bank accounts, utilizing the float time to withdraw funds before the initial check clears.
Retail Kiting:
Cashing a bad check at a retailer and subsequently writing another check, often including a cashback payment, before the first check clears. The cash obtained from the second check is used to cover the first check.
Circular Kiting:
Using multiple accounts at different banks, the kiter writes checks from one account to themselves at another, creating artificial funds to cover the initial check. This cycle continues until the kiter is apprehended or genuine funds are deposited.
Corporate Kiting:
Corporations may engage in kiting by manipulating funds between accounts to create the illusion of sufficient funds.
Consequences of Check Kiting
Check kiting is illegal and constitutes check fraud. Offenders face severe consequences, including:
- Criminal charges, such as bank fraud (18 U.S.C. §1344), misapplication (18 U.S.C. §656), or required entries (18 U.S.C. §1005)
- Fines of up to $1,000,000
- Imprisonment for up to 30 years
- Civil penalties, including damages and restitution
Sources:
FAQs
What is check kiting?
Check kiting is the fraudulent practice of writing checks from multiple bank accounts with insufficient funds to cover the amounts drawn, exploiting the time lag between check deposits and withdrawals.
What are the different types of check kiting?
There are several types of check kiting, including bank kiting, retail kiting, circular kiting, and corporate kiting.
What is the purpose of check kiting?
The primary purpose of check kiting is to artificially inflate the balance of a checking account, enabling the clearance of checks that would otherwise bounce due to insufficient funds.
Is check kiting illegal?
Yes, check kiting is illegal and constitutes check fraud. Offenders face severe consequences, including criminal charges, fines, and imprisonment.
What are the consequences of check kiting?
Check kiting is a serious offense that can result in criminal charges, fines of up to $1,000,000, imprisonment for up to 30 years, and civil penalties, including damages and restitution.
How can I avoid becoming a victim of check kiting?
To avoid becoming a victim of check kiting, be cautious when accepting checks, especially from unknown individuals or businesses. Verify the legitimacy of the check by contacting the bank that issued it.
What should I do if I suspect someone is check kiting?
If you suspect someone is check kiting, report it to your bank and the authorities immediately. Providing evidence, such as copies of the checks, can assist in the investigation and prosecution of the offender.