What does it mean to kite money?

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.

Why is kiting a check illegal?

Under California state law, Penal Code § 476a is how check kiting is prosecuted. To be convicted of this, the prosecution must prove that one knowingly wrote a check knowing there were insufficient funds to cover the full amount of the check and in doing so, hoped to obtain something in return for passing the check.

What is an example of check kiting?

An example of check kiting would be as follows: on Monday, a prospective check kiter deposits a $500 check from account A into account B and then shortly thereafter deposits a $500 check from account B into account A. On Tuesday, another round of deposits is made as well as some partial withdrawals.

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.

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.

How do I stop check kiting?

Here are some tips to prevent becoming a victim of check kiting:

  1. Only accept checks for the exact amount owed to you.
  2. Wait until the check clears to refund the overpayment.
  3. Look into checks that clear your bank account out of sequence.
  4. Restrict access to company checks if you’re a business owner.

How does check kiting work?

Here’s how it works. Suppose you have $10 in bank A but you write a check on the account for $500 and deposit it in bank B. Before that deposit can be processed, you go back and tell the teller at bank B that you want to withdraw $400. The teller gives you $400 in cash, and you disappear before the check bounces.

Is check kiting a crime?

Legal Penalties Kiting is a serious crime and is one of the most enforced types of white collar crimes. First-time offenders can face very stiff penalties, including fines of $500,000 or more as well as more than 20 years in prison.

Can you go to jail for overdrafting your bank account?

Overdrawing your bank account is rarely a criminal offense. It depends on your intentions and your state’s check fraud laws. According to the National Check Fraud Center, all states can impose jail time for overdrawing your account, but the reasons for overdrawing an account must support criminal prosecution.

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. Later, the cash that is received from a second account is applied to the first account to cover up the original theft.

How common is check kiting?

Dedicated fraudsters are often responsible for the high dollar check kiting schemes, but regular customers do much of the smaller kiting that goes on. “Kiting happens on a daily basis at just about every financial institution,” according to Young.