Check kiting is the deliberate issuance of your check for which there isn’t sufficient cash to cover the stated quantity. The mechanics on this fraud scheme are as follows:
- Write a search for which there isn’t sufficient cash from the payer’s account.
- Build a checking account for a different bank.
- Deposit the fraudulent check in the checking account that’s just opened.
- Withdraw the funds from the new checking account.
- The entity damaged by check kiting is the bank that features allowed funds to get withdrawn from the modern checking account without first anticipating funds to arrive from the paying bank.
Banks combat this matter by not allowing funds for being withdrawn from a merchant account until a certain variety of days have handed down, by which time the possible lack of funds in the particular payer’s account can have been discovered. Likewise, there are many kiting indicators to consider, including the next:
- A large variety of check deposits every day
- Many checks are drawn on the same bank
- A large proportion of money in an account which has not yet eliminated the paying bank
- Deposits are becoming made through a number of bank branches, to make the volume regarding deposits less obvious towards the bank staff.
Check kiting is quite intentional. Someone engaged in kiting includes a detailed knowledge of how much time it takes regarding checks to clear your banker, and will take advantage of the timing delay to withdraw cash (even partial amounts) ahead of the bank discovers there’s a problem. A sophisticated check kiting scheme can result in multi-million dollar cutbacks.
Kiting is in particular effective when a person engages in a reasonable amount of typical check writing as well as depositing activities within the account over some time, so that the related account shows up perfectly normal, and thus is subject to fewer bank-imposed restrictions than might be the case for just a newly-opened account.
A kiting system may engage multiple banks, where a person is frequently shifting check payments among various accounts, just keeping ahead of the funds clearing method. This can be a meticulous problem when a kiting system is finally shut down, for one of the banks in the group may be stuck with the volume of the losses, depending on which checks were written from which accounts, and the timing of the payments.