Kiting is the fraudulent use of a financial instrument to obtain additional credit that is not authorized. … Misrepresenting the value of a financial instrument for the purpose of extending credit obligations or increasing financial leverage.
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.
How do you detect audit 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 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.
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 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 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.
How do you determine cash kiting?
Indicators of Check Kiting
- A large number of check deposits each day.
- Many checks are drawn on the same bank.
- A large proportion of cash in an account that has not yet cleared the paying bank.
- Deposits being made through multiple bank branches, in order to make the volume of deposits less obvious to the bank staff.
How do you stop kiting?
Here are some tips to prevent becoming a victim of check kiting:
- Only accept checks for the exact amount owed to you. …
- Wait until the check clears to refund the overpayment. …
- Look into checks that clear your bank account out of sequence. …
- Restrict access to company checks if you’re a business owner.
Is kiting illegal in Canada?
The problem be- came prevalent enough that it was made illegal in certain states of the U.S. by the early 1920s. In Canada, there is currently no provision of the Criminal Code (the “Code”) that specifically addresses kiting.
Do banks prosecute check kiting?
In the United States, check kites are prosecuted under Title 18, U.S. Code Section 1344, which is defined as obtaining the funds of a federal bank under false pretenses. In effect, a check kite is obtaining an interest-free loan from a bank without the bank’s knowledge.
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.