What is Check Kiting?
Check kiting is a form of fraud involving the sloshing of theoretical funds between two bank checking accounts. A check written to the criminal from one bank is deposited, and more importantly credited, to an account at a second bank. Because that second bank now shows a positive balance, the criminal can withdraw enough money to deposit back into the first bank before the check bounces for lack of funds.
This form of check kiting may seem to be too complicated for such a small payoff, but sloshing the funds back and forth between accounts can buy the criminal enough time to generate real money to cover any other outstanding checks. Some people have been known to use this method, called circular check kiting, when several checks on an overdrawn account may come due before a paycheck or other regular funds can be deposited. The circular check kiting scheme depends on the bank's delay between receipt of deposits and checks and their eventual processing, also known as "float time."
Some people who find themselves short on funds may resort to writing a bad check in anticipation of a deposit during the float time. While this in itself is an illegal act, the chances of getting caught by the bank or prosecuted by a retailer are fairly slim. A professional check kiter, also known as a paper hanger, is more motivated by personal gain than economic survival, however. A professional check kiter will continue to slush funds between accounts until he or she is caught by the law or a bank catches onto the scam.
There is another form of check kiting which involves the unwitting participation of a third party. A "paper hanging" customer may make a very small purchase and pay for it by check. Because grocery stores often allow customers to overwrite a check for additional cash, the check may be written for the maximum amount allowed. Funds from a second account may be sloshed over to cover the amount of the check, but the cash remains in the custody of the dishonest customer.
The illegal practice of check kiting may have met its match in modern technology, however. Most banks now use an electronic receipt system which instantly records and in many cases processes cash transactions. This technology have essentially eliminated or reduced "float time" between banks. It is now much more difficult to withdraw funds from one bank and deposit them in another before the two banks can compare transaction records. Without significant float time, check kiting schemes have become too risky for many professional paper hangers and con artists.
How do you report individuals if you are positive that they have kited checks for years?
This is somebody (teller, bankers, retailers) who are not up-to-date about check processing and electronic transactions and other "surveillance" that can be used to process payments. I'm sure by now some of these standards from decades ago like actually running a check and storing customer's information aren't necessary.
Businesses have to be careful not to cross the line of invading personal privacy when requesting and requiring so much information to process checks of minimal value. One has to stay current in several aspects of the local economy and the who's who of finances and many aren't doing this. Consumers and shoppers are bearing the brunt!
I was written a sum of about $4,500 dollars worth of checks in a matter of two days. The lady told me she had the money to cover them.
I did some work for her because she was not able to do so, and about a month or so later, I was arrested. They said I stole the money from my bank. They arrested her for bad checks. However, they are trying to charge me with felony theft when I knew nothing about her finances to begin with. What should I do?
I used to do this when the floating time was at least two or three days. I would write a check from one bank on Wednesday, and being the honest person I was I would cover the charge with my paycheck on Friday before it bounced.
It worked fine and afterward I found out I was committing a crime. Sheesh! Glad I was never caught. It's too hard to do it now. You never know how long the floating time is now.
We have an employee who writes 20-30 checks a day for $20 and over every day. Our store allows this.
I see her daily put the extra money into the bank at the front of the store. Who can I report this to in order to make it stop? She has done this for years. I have been told by others there is nothing we can do since the checks are not bouncing.
A company I do subcontract work for has done this twice in the last six months, I want to know if it is illegal or just something I must tolerate.
They pay us every Saturday for work that was completed two weeks ago. We deposit the check on Monday. It clears (or becomes available) on Tuesday. We write checks to people and companies that are owed for the jobs that were paid Tuesday morning.
On Tuesday afternoon the company that wrote us the check puts a stop payment on the check and the funds are removed from our account. In some cases, this makes our account go negative whereby we incur overdraft fees. Then they reissue a check two days later with some far fetched excuse as to why it happened.
We believe they are using the same money to pay two bills, i.e., they pay us we keep working, then they stop payment and pay the supply house so they keep delivering while they buy time for more money to come in to pay us again.
Are they liable for any of the overdraft fees? Is this practice, legal and only deceptive and a cost of doing business, or is it fraud?
It's very frustrating and I'd like to know if there is any recourse I can threaten if it continues. Thanks for your help.
Got a reprimand on the job for taking bad checks.
I have started to put drivers license numbers on checks and people have came in and paid for their bad checks? The job wants me to also get make and model and year of vehicle plus plate number.
to anon30137: From my limited knowledge of legal stuff, it would almost certainly be better to turn in the person and explain you didn't know what was going on than suffer the consequences of later having that knock on the door when they find out for themselves and know you were involved. You might consult with an attorney first, just to be sure, but law enforcement does tend to be reasonable on this sort of "unwitting accomplice" thing.
@ anon30322- when the credit union debited your "solo" account to cover your "co-owned" account with you son, that's the bank's right of off-set. Being a joint account holder gives you the rights and full access to the account, you also share the responsibility of maintaining it. About your son writing checks against a to-be closed account, the bank cannot reprimand him since he is still an account holder but the merchants to whom he gave his checks too can sue him for fraud especially when they try to clear the checks and the account is already closed. almost close to check kiting, the difference is the check writer does not intend to cover the check that he wrote out. you do check kiting to avoid OD fees or NSF fees.
My aunt was a victim of identity theft by her caretaker. My aunt was in her 90's, blind, and bedridden. Her caretaker had her sign things, and my aunt totally trusted her to take care of her finances. The caretaker had a gambling addiction and began using my aunt's checking account to kite checks to her checking account. She then began to open other accounts in my aunt's name, credit cards in my aunt's name, and moved my aunt's IRAs to some of those bogus accounts. She ended up taking almost everything - my other aunt came to live with them and was a former accountant and caught the caretaker when she found some of the bogus bank account statements. The caretaker was arrested and is serving time, but my aunt died penniless. My point here is to warn people who may have elderly relatives who live in their homes with caretakers - do not let the caretaker exclude people from visiting the relative and do not let the caretaker have access to any financial assets of the elderly.
With our bank, if we deposit a check the funds are not available right away. Also, while some banks allow you to cash a check outright, others won't cash it unless you have that amount in your account--if you're cashing a check for $150, you have to have at least $150 in your account just in case, or they tell you just deposit the check and wait for it to clear.
Now I believe I know why banks have these policies--because of the game-playing!
What do I do? My son and I had an account together at a credit union when he was a teen. We did not change it as he became an adult. When he returned from Iraq he turned to drugs. He spent his entire savings on drugs to the tune of $25,000 in 3 months. Then he used his ATM card to keep drawing on his checking account for another $3003. The credit union then debited my other account to cover his OD since my name was still on his account. I promptly instructed them to close that account. He cleaned himself up with help from family, got a job, a car and a place to live. Then he stopped going to work, didn't pay his car payment or rent and he wrote checks from a closed bank account and deposited them into the credit union *in that account* that was to be closed. This time it was $3362.
I was not notified until 2 weeks later at which time the credit union debited *my* account again to cover his OD.
This is Kiting if my understanding is correct. Is there any criminal or legal thing that can be done about him so it can't happen again. If so, what is it? Thank you
I used to make deposits for a family member for many years and had no knowledge that this person was check kiting. I am going to report this criminal, will I be held responsible for his crime by having aided him, even though I had no knowledge?
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