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 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.
What does kiting mean in banking?
Check kiting is the illegal process of writing a check off of a bank account with inadequate funds to cover that check. Check kiting relies on the fact that it takes banks a few days (or even longer for international checks) to determine that a check is bad.
Is kiting money illegal?
The consequences of check-kiting
Check-kiting is illegal and is considered fraud. … Sometimes, if the amount of money is paid back, the bank will allow the account holder to keep the account and perhaps remove some features, such as the ability for the account holder to deposit personal checks.
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.
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.
Why is kiting a check illegal?
Under California state law, Penal Code § 476a is how check kiting is prosecuted. … This can occur when one writes a check on an account one knows was closed earlier or one tries to cash a check on an account one knows is empty or insufficient to cover the check.
What procedures do auditors use to 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 …
How do criminals Wash checks?
Criminals remove the “payee” portion and the “amount”. Your signature remains intact. They use solvents such as acetone, brake fluid and bleach. Once the check is “washed”, the payee and/or the amount of the check can be altered.
Is check kiting a federal crime?
But, when kiting involves large amounts or multiple checks, felony criminal charges may come into play. An offender can expect to face both state and federal charges for check kiting, as this fraud is regulated by the federal government.
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.