Kiting
What Is Kiting?
Kiting is a fraudulent financial practice that involves taking advantage of the time delay between banks processing transactions. It typically occurs when someone writes checks between multiple accounts without sufficient funds, relying on the float period to temporarily create the appearance of available funds.
Check kiting is considered a form of financial fraud.
Why It Matters
Kiting undermines the integrity of the banking system and can lead to financial losses for banks and other institutions. Because it involves intentional deception, it is illegal in many jurisdictions.
Financial institutions actively monitor accounts to detect patterns that may indicate check kiting.
How Kiting Works
Check kiting usually involves multiple bank accounts.
A typical scheme may involve:
- writing a check from Account A without sufficient funds
- depositing it into Account B
- withdrawing funds before the check clears
- repeating the process between accounts
Banks use monitoring systems to identify suspicious activity related to kiting.
Kiting vs Float
- Float refers to the normal processing delay between transactions.
- Kiting intentionally exploits the float period to create fraudulent access to funds.
FAQs About Kiting
Is check kiting illegal?
Yes, it is considered a form of financial fraud.
How do banks detect kiting?
Banks monitor unusual transaction patterns between accounts.
Can kiting involve electronic transfers?
While most commonly associated with checks, similar fraud schemes can involve other payment methods.
Related Terms
