What Is Kiting? Kiting is the fraudulent use of a financial instrument to obtain additional credit that is not authorized. Kiting encompasses two main types of fraud: Issuing or altering a check or bank draft, for which there are insufficient funds.
How do you determine kiting?
Indications of a potential check-kiting operation include the following: (1) several accounts owned, or controlled, by the same individual, (2) identifiable patterns of transactions, including deposits, transfers, and withdrawals between those accounts, (3) deposits drawn on other institutions by the same holder of the …
What is check kiting example?
Simple check-kiting: Say, for example, that you write yourself a check for $500 from checking account A, and deposit that check into checking account B — but the balance in checking account A is only $75. Then, you promptly withdraw the $500 from checking account B.
Why is it called check kiting?
The term “check kiting” first came into use in the 1920s. It stemmed from a 19th-century practice of issuing IOUs and bonds with zero collateral. That practice became known as flying a kite, as there was nothing to support the loan besides air.
What is kiting and how can it be prevented?
The strongest method for deterring or stopping kiting is observant, alert tellers, and the aid of the computer to detail a list of all items presented for payment that are drawn against uncollected funds.
What is the difference between lapping and kiting?
What is the difference between lapping and kiting? Lapping occurs when cash is stolen upon receipt from one customer’s account. … Kiting occurs when funds are stolen from the company and, to cover this theft, the employee transfers money from one bank account to another account right before year-end.
What is cutting a check?
Definition of cut a check
US. : to write a check and give it to someone The company cut him a check and he cashed it.
What is ACH kiting?
In ACH check kiting, a criminal will juggle money bank and forth between accounts at separate banks so that the ACH is registered as valid when it is checked, but then the money is gone by the time the transfer goes through.
Is check kiting money laundering?
Kiting can occur within a bank because criminals will open multiple accounts within multiple organizations in order to commit kiting, and bank employees are not aware the criminal has already opened multiple accounts. … Banks are susceptible to money laundering within the organization.
How might auditors detect kiting?
The auditor can detect this form of kiting by ensuring any outstanding deposit appearing on a bank reconciliation at balance date that arises from an inter-entity cheque (in the example, the deposit from A of 60) is also recorded by the paying entity as a cheque drawn prior to balance date (and not, as shown above, as …
What is cash lapping?
A lapping scheme is a fraudulent practice that involves altering accounts receivables to hide stolen cash. The method involves taking a subsequent receivables payment from a transaction (for example, a sale) and using that to cover the theft.
Why do Cheques float?
What Is the Float? In financial terms, the float is money within the banking system that is briefly counted twice due to time gaps in registering a deposit or withdrawal. These time gaps are usually due to the delay in processing paper checks. A bank credits a customer’s account as soon as a check is deposited.