Kiting

Kiting is a fraudulent practice that exploits the time it takes for a check to clear. It occurs when an individual writes a check against an account that does not have sufficient funds, hoping to deposit another check into a different account before the first check is processed. The goal is to create a temporary illusion of funds that do not exist.

How Kiting Works:

1. Writing Checks:

   • A person will write a check for an amount larger than what is in their account, often to a third party who is complicit in the scheme.

2. Depositing in Another Account:

   • The individual then deposits another check into a different bank account, ideally with sufficient funds. This second check is intended to cover the first check before it clears.

3. Float Period:

   • The time it takes for the bank to process the first check creates a "float" period during which the account holder hopes that the funds from the second check will be available before the first check is cashed.

4. Risks and Consequences:

   • Kiting is illegal and considered a form of check fraud. If caught, individuals can face criminal charges, fines, and even imprisonment. Additionally, banks have measures in place to detect such activities, and accounts may be flagged or closed as a result.

5. Preventive Measures:

   • To combat kiting, banks use various tools and strategies to monitor for unusual patterns of check writing and deposits. They encourage customers to maintain sufficient balances to avoid the temptation of this practice.

Conclusion: Kiting is a serious offense that undermines the integrity of the banking system. It not only poses risks to the perpetrator but also affects the financial stability of institutions involved. Understanding the implications of kiting can help individuals avoid engaging in such risky behavior.