What is Check Kiting?
“Check Kiting” is also refered to as “Circular Kiting”, or “Riding the Float”. These illegal practices have been used against individuals and for small, medium, and large businesses. These schemes have been perpetrated since the dawn of banking and check writing. Check kiting is also known as “Kiting” for short.
The premise is very simple and for this definition and description of what kiting is, we will use an individual for the example. Basically the offender writes a check for a goods or services, or at a bank for cash, but they know full well that there is insufficient funds to make the check “good”. There is a delay in time before the check is processed by the business or the bank, and before the criminal can be caught they have deposited another check from a different bank to cover the check they just cashed or wrote.
Check Kiting is is usually carried out using what is known as “Circular Kiting” whereby many different banks and many different checking accounts are used in a circular fashion, and carefully timed to make it look like there is real money in all of these accounts.
Definition of Circular Check Kiting
Circular Kiting is usually perpetrated by criminals who use a vast ring of different financial institutions in order to capitalize on bigger amounts of money. Sophisticated Kiting of this kind is not easy to do, and it makes us ponder why people who can be so smart, so clever, so hard-working, don’t use their smarts for earning money in a legitimate and legal way.
So for our purposes circular check kiting is just a more advanced form of the initial description above.
The vast majority of check kiting is perpetrated by individuals who are down on their luck, have really poor credit because of really bad choices, and find themselves in dire financial straits. Anybody who has claimed bankruptcy is likely experienced themselves carrying out a mild form of check kiting, using their credit cards, employment paychecks, and / or their checking accounts and savings accounts.
What is “The Float” or Cheque Floating?
The time between when the check is written, and when it is fully processed by a banking insitution, is called “The Float”, or “Check Floating”. The extremely clever check fraudsters are experts at manipulating the float, by which they take advantage of this delay between when a check is written and when it is to be processed. They will make sure a different check from a different bank is deposited into their account to cover the check they had cashed initially – but, of course nothing is covered and there is no real money to make any other checks valid and legal. So for our definition today the float is just simply the delay period caused by the lending institutions typical process time.
A Simple Description of an Individual Check Kiting
Just in case these descriptions and definitions aren’t making any sense to you, let us use a real-world example.
Dennis doesn’t have the money to cover his mortgage payment, so he deposits a check in to his personal checking account where his mortgage payment comes out of. He does this the day his mortgage payment is due (deposits the check from a different bank where he doesn’t have sufficient funds either). The bank that holds mortgage cashes his fraudulent check from a different lending institution and his mortgage payment appears to be covered. Before it is discovered that the check you deposited into his account is fraudulent, he deposits yet another lending institutions check in the second account, and the circle continues until he is caught. And these fraudsters always get caught.
In many cases this example is an individual who was waiting for a paycheck, or some other kind of cash to come into their possession, and they simply make good on the last check they write by depositing the funds into that last bank account in the cycle, thereby clearing all the checks down the line like so many dominoes.
Famous Check Kiter Frank Abagnale Jr.
Frank Abagnale Jr. was became famous as the United States most wanted criminal for check kiting in the 19702. He was famous because of the movie, Catch Me If You Can, and his book which is also called Catch Me If You Can. He was extremely clever when it came to outsmarting financial institutions, the Federal Reserve Bank, and anybody else he came into contact with. You can read more about his check fraud and you can watch the movie to learn the whole story. At his very core Abagnale was a check fraud expert, and all that is other criminal acts were nothing more than an extension of where his check fraud activities took him.
If you are considering the dark arts of illegal check fraud, I assure you that you will be caught, and you will be caught quickly. Since the days of the 1970s when Abagnale was actively carrying out his criminal enterprises, the whole entire banking institution system of printing checks, processing checks, and clearing checks has changed dramatically. In fact, after his incarceration Abagnale went to work for the authorities showing them how to catch check fraud and check kiting criminals.
In the 1960s and the 1970s you could get away with check kiting quite easily for some time if you had any smarts of all (and by smarts I mean simply being clever – I don’t mean wise). With all of the new technologies for tracking in place and the digital world of computer records and Internet data transfer rates, using a check kiting scheme will land you in jail before you can say,
“Just a second, I will write you a check”.
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