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An example of a check, an instrument potentially used for kiting

Check kiting or cheque kiting (spelled differently in American and British English) is a form of check fraud, involving taking advantage of the float to make use of non-existent funds in a checking or other bank account. In this way, instead of being used as a negotiable instrument, checks are misused as a form of unauthorized credit.

History of the term

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The term "check kiting" first came into use in the 1920s. It stemmed from a 19th century practice of issuing IOUs and bonds without any collateral. That practice became known as "flying a kite", as there was nothing to support the loan besides air.[1]

Description and varieties

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Kiting is commonly defined as intentionally writing a check for a value greater than the account balance from an account in one bank, then writing a check from another account in another bank, also with non-sufficient funds, with the second check serving to cover the non-existent funds from the first account.[2] The purpose of check kiting is to falsely inflate the balance of a checking account in order to allow written checks to clear that would otherwise bounce. If the account is not planned to be replenished, then the fraud is colloquially known as paper hanging.[3] If writing a check with insufficient funds is done with the expectation they will be covered by payday it is called playing the float.

Some forms of check fraud involve the use of a second bank or a third party, often a place of retail, in order to delay the absence of funds in a transactional account on the day the check is due to clear at the bank. Such acts are frequently committed by bankrupt or temporarily unemployed individuals or small businesses seeking emergency loans, by start-up businesses or other struggling businesses seeking interest-free financing while intending to make good on their balances, or by pathological gamblers who have the expectation of depositing funds upon winning. It has also been used by those who have some genuine funds in interest-bearing accounts, but who artificially inflate their balances to increase the interest paid by their banks. Criminals have taken advantage of the check float to pass fraudulent checks through solicited users of online auctions.[4]

Circular kiting

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Circular kiting describes forms of kiting in which one or more additional banks serve as the location of float, and involve the use of multiple accounts at different banks. In its simplest form, the kiter, who has two or more accounts at different banks, writes a check on day one to themselves from bank A to bank B (this check is referred to as the kite), so funds become available that day at bank B sufficient for all checks due to clear. On the following business day, the kiter writes a check on their bank B account to themselves and deposits it into his account at bank A to provide artificial funds allowing the check they wrote a day earlier to clear. This cycle repeats until the offender is caught, or until the offender deposits genuine funds, thereby eliminating the need to kite, and usually going unnoticed.

Complex versions of this scheme have occurred involving two separate people, each with an account at a different bank, constantly writing checks to one another, or a group of individuals writing checks circularly, thereby making detection more difficult. Some kiting rings involve offenders posing as large businesses, thereby masking their activity as normal business transactions and making banks inclined to waive the limit of funds made available.

Retail-based kiting

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Retail-based kiting involves the use of a party other than a bank to unknowingly provide temporary funds to an account holder lacking funds needed for check to clear. In these cases, the kiter writes checks to one or more places of retail (usually supermarkets) that offer cash back in addition to the amount of a purchase as a courtesy to their patrons. Following the transaction, the kiter deposits the cash received back into his/her bank on the same day in order to provide sufficient funds for other check to clear, while the check written that day will clear one or more business days later. This action is repeated as necessary until legitimate funds can be deposited into the account.

The principal basis of retail kiting is that by giving cash (which is immediately available, and whose deposits clear faster than checks do) in exchange for a check, the retail establishment is providing check-cashing services and taking credit risk on the check – it may be dishonored. Another version of this scheme involves purchasing an item from a place of retail with a check, and returning it promptly for a cash refund, followed by depositing that cash into the transactional account. This is more difficult these days, as more places of retail will delay a refund on purchases made by check.

Retail kiting is more common in suburban areas, where multiple supermarket chains exist within proximity. While it is more difficult to detect and prosecute, it involves lesser amounts of cash than circular kiting, and therefore is a lower threat.

Example

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For example, suppose an individual has $10 in a bank account and no cash, but wishes to purchase an item costing $100. Here is how the fraud could be accomplished:

  1. The individual first writes Check #1 (a bad check) for $100, and uses it to purchase the item. The check will clear (i.e., the check amount will be deducted from his account) at the end of the next business day (say Check #1 is written on day T−1). The individual is now technically insolvent, as they owe $100, but only have $10 in the bank. This fact is not known, however, as the check has not yet been presented for payment. This will occur on day T+0.
  2. In order to cover the first check, on day T+0 the individual goes to a retail establishment and writes Check #2 to purchase an item, and gets an additional $100 cash back by writing the check for more than the value of the item purchased. Check #2 is written on day T+0 – this is the kite.
  3. The individual then deposits the $100 so the account now has $110, which is sufficient for Check #1 to clear, but after this there are non-sufficient funds for Check #2 (the kite) to clear.
  4. This process can be repeated, with the amount possibly increasing (as in a Ponzi scheme).
  5. If the individual then gets $100 in cash on day T+1 and deposits it in their account, Check #2 clears and the retail establishment victims who accepted the bad check do not in fact lose money, and remain unaware.
  6. If, on the other hand, the individual does not get enough cash and does not continue kiting, then Check #2 (or some further check, if this has continued a few iterations) bounces, and the retail establishment has been defrauded – the consequences for accepting the bad check is the $100 cash loss plus the cost of the product the individual fraudulently purchased.

Corporate kiting

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Corporate kiting involves the use of a large kiting scheme involving perhaps millions of dollars to secretly borrow money or earn interest. While limits are often placed on an individual as to how much money can be deposited without a temporary hold, corporations may be granted immediate access to funds, which can make the scheme go unnoticed.[5] This was the case with E. F. Hutton & Co. in the early 1980s.[6]

[edit]

Check kiting is illegal in many countries. However, most countries do not have a float system and checks are not paid until they are cleared, so check kiting is impossible.

United States

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According to the United States Department of Justice, check kiting can be prosecuted under several existing laws including those against bank fraud (18 U.S.C. § 1344), misapplication (18 U.S.C. § 656), or required entries (18 U.S.C. § 1005). It can draw a fine of up to $1,000,000.00, imprisonment for up to 30 years, or both, and many first-time offenders with no criminal background have received stiff sentences. In addition to the federal penalties, state law often provides for alternate civil and criminal consequences.[7]

Although the United States prosecutes some paper hangers under federal law,[8][9] most issuance of bad checks in the United States is prosecuted as a state offense.

Laws vary from state to state, but one example is Ohio Revised Code 2913.11(2)(B), which states: "No person, with purpose to defraud, shall issue or transfer or cause to be issued or transferred a check or other negotiable instrument, knowing that it will be dishonored or knowing that a person has ordered or will order stop payment on the check or other negotiable instrument". Ordinarily, passing a bad check in Ohio is a misdemeanor, but large checks or multiple checks within a six-month period aggregating to large amounts make it a 5th-, 4th-, or 3rd-degree felony, depending on the amounts involved.[10]

Some states protect the careless by making the intent to defraud an element of the crime, or exempting from punishment those that pay the check later. For example, Indiana's check deception statute states that it is a defense if the person issuing the check "pays the payee or holder the amount due, together with protest fees and any service fee or charge, ... within ten (10) days after the date of mailing by the payee or holder of notice to the person that the check, draft, or order has not been paid by the credit institution." Furthermore, it is not a crime if "the payee or holder knows that the person has insufficient funds to ensure payment or that the check, draft, or order is postdated", or "insufficiency of funds or credit results from an adjustment to the person's account by the credit institution without notice to the person."[11]

See also

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References

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Revisions and contributorsEdit on WikipediaRead on Wikipedia

Check kiting

View on Grokipedia
from Grokipedia
Check kiting is a form of financial fraud in which an individual or entity exploits the time delay, known as the "float," in the processing and clearing of checks between bank accounts to create the appearance of sufficient funds where none actually exist. This scheme typically involves writing a check from one account to deposit into another account at a different bank, then withdrawing funds from the second account before the original check bounces due to insufficient funds, thereby obtaining unauthorized credit. The practice relies on the banking system's funds availability rules, such as those under Regulation CC, which allow provisional credit for deposits during the clearing period. Originating in the early , check kiting draws its name from a 19th-century to flying a , referring to issuing unsecured IOUs or bonds that temporarily "soar" on false value before collapsing. Historically, the scheme thrived on multi-day clearing times for paper checks, but the advent of digital technologies like Check 21 in 2004 and mobile remote deposit capture has shortened float periods, making traditional kiting more detectable while enabling hybrid methods involving electronic transfers, ACH payments, and peer-to-peer apps. Despite these advancements, check kiting remains a persistent threat, with schemes often escalating to involve multiple accounts across banks or even corporations, as seen in cases where fraudsters have cycled billions in bad checks before detection. Common variants include circular kiting, where checks are repeatedly exchanged between two or more accounts to inflate balances artificially; retail-based kiting, in which perpetrators write bad checks for purchases or overpayments to obtain cashback from merchants; and corporate kiting, involving businesses that deposit uncollected funds to cover large-scale operations. Red flags for detection encompass patterns such as frequent high-value deposits followed by immediate withdrawals, unusual check volumes between distant banks, or deposits made at atypical hours, which banks monitor through automated systems and reports. In the United States, check kiting constitutes under Title 18 U.S. Code § 1344, requiring proof of intent to defraud a federally insured through false representations, such as artificially inflated account balances. Convictions can result in severe penalties, including fines up to $1,000,000 and for up to 30 years, with sentencing influenced by the scale of financial loss and the perpetrator's prior record. Prevention strategies emphasize real-time transaction monitoring, strict verification of uncollected funds, and interbank information sharing to safeguard the integrity of the banking system.

Definition and Mechanics

Definition

Check kiting is a form of check fraud in which an individual or entity exploits the float period—the delay between the deposit of a check and its actual clearance by the —to create the illusion of sufficient funds in an account that lacks adequate balance. This practice involves writing checks drawn on insufficient funds from one account and depositing them into another account, often at a different , thereby temporarily inflating the available balance to withdraw or spend money that does not exist. The scheme relies on the time lag in processing, allowing the perpetrator to access illusory before the banks reconcile the transactions and discover the fraud. Key elements of check kiting include the intentional use of multiple accounts to cycle funds through repeated deposits and withdrawals, distinguishing it from a simple bounced check, which typically results from an unintentional rather than a deliberate, ongoing scheme to defraud. In the British English variant, known as " kiting," the same principles apply but use the regional spelling for negotiable instruments.

How It Works

Check kiting exploits the delay in check processing, known as the float, which allows temporary access to uncollected funds between the time a check is deposited and when it clears. This float typically lasts 1 to 3 business days due to manual verification or interbank transfers, during which the depositing bank credits the account provisionally, creating an illusion of available balance. The core process begins when an individual with insufficient funds in Account A at Bank 1 writes a check to deposit into Account B at Bank 2. The depositor then withdraws or issues payments from Account B while the check remains in float, treating the unverified funds as available. To sustain the scheme, a check is written from Account B back to Account A before the original check clears, artificially inflating balances in a cycle that mimics legitimate transactions but relies on timing rather than actual deposits. For instance, suppose two accounts each start with $100. A $1,000 check from Account A is deposited into Account B, immediately showing a $1,100 balance there, from which $1,000 is withdrawn. Before clearance, a $1,000 check from Account B is deposited into Account A, boosting it to an apparent $1,100. This rotation can continue, expanding the as larger checks are cycled, until the volume or a clearance reveals the insufficiency. The scheme collapses when a check finally clears against insufficient funds, triggering overdrafts, returned items, and fees that expose the , often resulting in losses from the withdrawn float amounts.

History

Origin and Etymology

The term "kiting" in the context of financial fraud originated in early 19th-century , deriving from the phrase "fly a ," which by 1805 referred to raising money through issuing backed by nonexistent funds, evoking the image of a lightweight floating without substantial support. By 1839, "" was documented as a meaning to write a fictitious check or similar instrument, metaphorically extending the idea of unsupported financial promises "soaring" temporarily on air alone. This linguistic root drew from broader 19th-century practices of issuing IOUs and bonds without collateral, a scheme known as "flying a " due to its illusory nature. Early frauds involving forgeries of negotiable instruments, often prosecuted under general statutes for obtaining money by , laid the groundwork for exploiting clearing times in financial transactions. A notable example is the 1873 Bank of England forgeries, where criminals used forged bills of exchange to withdraw funds by leveraging international settlement delays, resulting in significant losses before detection. The specific practice of check kiting emerged in the United States during the , coinciding with the expansion of check-based banking and the "float" system, where delays in check clearing allowed temporary access to uncollected funds. Building on 19th-century deceptions, it adapted the kiting metaphor to checks as banking literature began documenting schemes that inflated account balances through circular deposits. The first references to "check kiting" appeared in U.S. financial discussions around this period, marking its transition from informal frauds to a formalized check fraud exploiting modern banking mechanics.

Notable Historical Cases

One of the earliest documented instances of check kiting in the United States occurred in , when an individual defrauded six banks in New Orleans by issuing checks of $1,800 each across the institutions, totaling $10,800, exploiting the multi-day delays in check verification common in that era. Such small-scale schemes were prevalent in the , particularly in rural areas where slow mail delivery and limited interbank communication allowed perpetrators to withdraw funds before checks could be cleared, often resulting in losses of several thousand dollars per incident to local banks. A landmark corporate case unfolded in the mid-1980s involving the brokerage firm E.F. Hutton & Company, where executives systematically overdrew accounts at approximately 400 banks nationwide from 1980 to 1982, creating artificial floats that peaked at approximately $250 million on certain days to secure interest-free loans. The scheme relied on delaying check deposits and withdrawals to exploit clearing delays, misstating average daily overdrafts at around $15 million. In 1985, E.F. Hutton pleaded guilty to 100 counts of mail fraud and 1,900 counts of wire fraud, resulting in a $2 million fine, $750,000 in investigative costs, and millions in restitution to affected banks. The scandal highlighted vulnerabilities in the check-clearing system and costing banks tens of millions of dollars in foregone interest across institutions. Corporate check kiting persisted into the 1990s, with examples including schemes tied to savings and loan frauds prosecuted in 1991. Another notable 1990s case saw a broker in , plead guilty in 1993 to via check kiting, causing American Security Bank a loss of $445,000 through cyclic deposits between accounts. Check kiting schemes have continued into the . In 2020, the former president of an Ohio healthcare management company pleaded guilty to a $59 million check kiting that exploited the float between multiple accounts over several years. These historical cases inflicted significant financial on , with aggregate losses in the millions during the alone, and underscored the need for regulatory reform to accelerate check processing. The E.F. Hutton affair, in particular, played a role in prompting the Expedited Funds Availability Act of 1987, which mandated faster fund availability and reduced the float time that kiting schemes exploited.

Varieties of Check Kiting

Circular Kiting

Circular kiting is a fraudulent scheme that utilizes two or more bank accounts, often held by the same individual at different financial institutions, to generate an illusory flow of funds by repeatedly writing and depositing checks in a closed loop. This creates temporary credit to offset insufficient balances, allowing the perpetrator to withdraw or spend money before the checks are verified and rejected. The scheme fundamentally depends on the interbank float—the processing delay between check deposit and clearance, which can span one to several days—enabling the artificial of account balances without actual underlying funds. Key characteristics include high-frequency deposits between controlled accounts, escalating check amounts to amplify the perceived , and uncollected funds vastly exceeding available collected balances, all orchestrated with deliberate intent to exploit banking timelines. It is most commonly associated with individuals managing personal accounts for short-term financial maneuvering, though the pattern can expand to involve additional accounts for greater scale. A representative example involves an individual with Account A at Bank X (balance: $0) and Account B at Bank Y (balance: $100). The perpetrator writes a $500 check from Account A and deposits it into Account B, boosting B's apparent balance to $600 and enabling immediate withdrawals up to that amount. Prior to the initial check clearing and revealing the overdraft in A, a $500 check is then written from Account B and deposited into Account A to ostensibly restore its balance, restarting the cycle. This circular exchange persists, leveraging float periods to delay detection, until accumulated insufficiencies cause a check to bounce and expose the fraud. In contrast to other check kiting varieties, circular kiting operates exclusively through direct transfers between the perpetrator's own accounts, eschewing involvement from retailers or corporate structures that characterize those forms.

Retail Kiting

Retail kiting is a variant of check fraud in which perpetrators exploit the float—the delay between depositing a check and its clearance—to obtain unauthorized cash or goods through transactions at retail stores. In this scheme, an individual writes a check from an account with insufficient funds for a purchase at a retailer, often requesting cash back exceeding the item's cost, thereby creating temporary funds that can be deposited elsewhere to simulate coverage before the original check is processed. This method relies on consumer-facing retailers, such as grocery stores, that historically accepted personal checks and provided immediate cash returns without instant verification. Key characteristics of retail kiting include its dependence on third-party retail intermediaries that issue or accept during everyday purchases, distinguishing it from direct bank-to-bank transfers. It was particularly prevalent in the 1980s and , when manual check processing often took three or more days, providing ample float time for fraudsters to cycle funds across multiple locations and build a chain of transactions. Schemes typically involved starting with modest check amounts to avoid immediate suspicion, gradually escalating as the perpetrator rotated between stores to maintain the illusion of solvency. The rise of electronic check verification and faster clearing systems in the late significantly reduced its feasibility. A representative example illustrates the mechanics: A fraudster enters Store A with insufficient funds and writes a $100 check for a $20 purchase, receiving $80 in back. The individual then deposits the $80 into their , using it to write another check at Store B for a similar overage, obtaining additional back to "cover" the first check during the float period; this cycle repeats across different retailers until the scheme unravels when checks begin bouncing. Unique risks in retail kiting stem from retailer-specific policies, such as holds on check cashing or limits on cash back, which can shorten the effective float and prompt quicker investigations. Banks and stores may detect patterns through monitoring unusual deposit and withdrawal sequences tied to retail check volumes, leading to rapid account freezes or reversals that expose the . Retailers bear direct losses from dishonored checks, often prompting stricter verification protocols that further deter the practice.

Corporate Kiting

Corporate kiting refers to a form of check fraud conducted by businesses, where companies exploit the check clearing process by writing and depositing checks between their own accounts, subsidiaries, or affiliated entities to artificially inflate available funds and manage deceptively. These schemes often masquerade as routine inter-company transfers or legitimate payments, allowing organizations to access non-existent without immediate detection. Unlike smaller-scale kiting, corporate variants typically involve coordinated manipulation across multiple accounts to sustain operations or meet short-term obligations. Key characteristics of corporate kiting include transactions in the millions of dollars, frequently leveraging corporate systems or supplier cycles to perpetuate the . For instance, high-velocity deposits and withdrawals create uncollected float that exceeds actual balances, often resulting in frequent overdrafts masked by incoming from related entities. Such schemes were particularly prevalent in the and , when longer check float times and less rigorous electronic auditing enabled extensive losses to the banking sector before regulatory enhancements like expedited clearing reduced vulnerabilities. A typical example involves a parent company with insufficient reserves writing a large check to its , which deposits it and uses the apparent funds to pay a ; the then remits payment back to the parent, generating an illusion of enhanced to cover salaries or investments. This cycle exploits in verification, allowing the to appear . Corporate kiting often aims to secure additional loans by presenting falsified balance sheets or to conceal underlying , distinguishing it from other forms through its reliance on multi-entity structures and substantial financial stakes that can lead to institutional collapses if undetected.

United States

In the , check kiting is primarily prosecuted at the federal level under 18 U.S.C. § 1344, which criminalizes through any scheme or artifice executed with to defraud a or obtain its funds under . It can also be charged under 18 U.S.C. § 1005, which prohibits officers, directors, agents, or employees of FDIC-insured banks from making false entries in bank with to defraud, often applicable when insiders facilitate the scheme. Conviction under either requires proof of to defraud, and penalties include up to 30 years' and fines of up to $1,000,000, depending on the scheme's scope and any aggravating factors. At the state level, check kiting is typically treated as a form of or , with statutes varying by but often classified based on the amount involved. For example, in , it falls under Penal § 476a, prohibiting the issuance of checks or drafts with intent to defraud knowing insufficient funds exist, punishable as a wobbler ( up to 1 year in county jail or by 16 months to three years in state prison and fines up to $1,000) for amounts under $950, though larger schemes may escalate to grand charges with sentences of 16 months to 20 years under related provisions. In other states like , it is prosecuted as issuance of a bad check under Penal § 32.41, generally a Class B (up to 180 days in jail and $2,000 fine) for checks of $100 or more, emphasizing the role of the kited amount in determining severity, though aggregated schemes exceeding $2,500 may be charged as with penalties up to 20 years. To secure a , prosecutors must demonstrate key elements including the defendant's knowledge of insufficient funds in the account, deliberate exploitation of the check float—the delay in clearing—to create artificial balances, and specific to defraud rather than mere . Federal typically requires involvement of FDIC-insured banks, as defined in 18 U.S.C. § 1344, ensuring the scheme targets federally protected institutions. Enforcement is led by the (FBI), which investigates most cases including check kiting schemes, in coordination with the U.S. Secret Service for aspects involving forgery. Beyond criminal penalties, civil liabilities often include mandatory restitution to affected banks for losses incurred during the float period, as ordered under federal sentencing guidelines, along with permanent closure of the offender's banking accounts to prevent recurrence.

Other Countries

Check kiting is illegal in most countries outside the , where it is prosecuted as a form of under general statutes related to , , or financial misrepresentation. The practice is considerably rarer internationally compared to the U.S. due to structural differences in banking systems, which often lack the multi-day float period that enables kiting; instead, checks typically clear almost instantaneously or are supplanted by electronic alternatives. In the , for example, the (SEPA) supports real-time credit transfers that settle within seconds, rendering traditional check kiting schemes largely infeasible. In the United Kingdom, check kiting qualifies as fraud by false representation under the , an indictable offense carrying a maximum penalty of 10 years' imprisonment and/or an unlimited fine. In , it falls under section 380 of the as fraud involving deceit or falsehood, with indictable offenses for values exceeding $5,000 punishable by up to 14 years in prison. treats check kiting as fraud under section 192E of the Crimes Act 1900 (), which prohibits obtaining a financial advantage by deception, with penalties up to 10 years' imprisonment. In , where checks are infrequently used in favor of digital payments and , documented cases of check kiting remain limited, with fraud efforts predominantly targeting electronic scams. Prosecuting check kiting faces additional hurdles in jurisdictions without a strong check-based culture, such as , which has transitioned to a predominantly reliant on instant digital transfers; here, similar fraudulent activities often manifest through unauthorized wire transfers or account takeovers rather than checks. Cross-border instances of check kiting, involving multiple international banks, complicate enforcement due to varying treaties and the need for mutual legal assistance in cases. Recent trends indicate a modest rise in kiting-like schemes tied to , particularly among U.S. expatriates accessing international banking networks, though prosecutions emphasize broader financial provisions over check-specific rules.

Detection, Prevention, and Modern Developments

Detection Methods

Banks employ pattern analysis software to monitor account activity for signs of check kiting, such as rapid cycles of deposits and withdrawals between linked accounts. This includes checks that flag unusual transaction frequencies, like multiple daily deposits followed by immediate withdrawals, often exceeding normal patterns such as more than a few cycles per day. Ledger balancing reviews further aid detection by identifying discrepancies in account floats where credited funds do not align with actual cleared amounts. Technological advancements have enhanced detection through check imaging and truncation, enabled by the Check Clearing for the 21st Century Act (Check 21) of 2004, which allows banks to process digital images of checks for faster verification and reduced clearing times. This expedites the identification of kiting by minimizing the float period during which fraudulent balances can persist, enabling quicker cross-verification of transactions. AI-based algorithms, such as those in NICE Actimize systems, analyze transaction patterns in real-time to flag anomalies indicative of float exploitation, including circular fund flows across accounts or institutions. Manual detection relies on employee training to recognize "kite signatures," including frequent deposits of large, round-number checks from external accounts followed by swift withdrawals. Tellers and staff are instructed to scrutinize patterns like matching debit and credit amounts or repeated transfers that suggest artificial balance inflation. alerts, facilitated through networks like , allow institutions to share information on suspicious patterns, such as high-velocity check activity involving shared customers. Regulatory thresholds support detection by imposing holds on deposits for new accounts under Regulation CC, typically extending up to nine business days for check deposits to prevent premature access to potentially kited funds. Banks must also file Suspicious Activity Reports (SARs) for activities suspected of kiting when transactions aggregate over $5,000 with an identifiable suspect, triggering further investigation.

Prevention Strategies

Banks and businesses employ several operational safeguards to mitigate check kiting risks. One key banking practice is the implementation of positive pay systems, where businesses provide their banks with a file containing details of issued checks, such as check number, amount, and payee, allowing the bank to verify presented checks against this list before honoring them. This process helps prevent unauthorized or altered checks that could facilitate kiting schemes by ensuring only legitimate transactions are processed. Additionally, banks place holds on deposits, particularly for new accounts or large checks, in accordance with Regulation CC, which limits the availability of funds to reduce the float time exploited in kiting. Verification calls to the check's drawer or issuer are another standard procedure, enabling banks to confirm the legitimacy of suspicious deposits before crediting funds. Technological advancements further bolster prevention efforts by shifting away from traditional checks toward more secure alternatives. Promoting electronic payment methods, such as (ACH) transfers and wire payments, minimizes reliance on paper checks and eliminates the delays that kiting depends on, as these methods clear funds almost immediately. Secure check stock, featuring built-in security elements like watermarks, , and heat-sensitive ink, deters forgery and alteration attempts that could support kiting activities. Businesses are encouraged to use such high-security checks to make fraudulent manipulation more difficult and detectable upon inspection. Regulatory measures play a crucial role in curbing check kiting by standardizing funds availability and raising awareness. The Expedited Funds Availability Act of 1987, implemented through Regulation CC, mandates that banks make most check deposits available within two business days, significantly reducing the float period that kiting schemes exploit by limiting the time for artificial balance inflation. The (FDIC) and Office of the Comptroller of the Currency (OCC) conduct education campaigns and provide resources to enhance awareness, including guidance for financial institutions on training staff to recognize and prevent check-related risks. These efforts emphasize proactive policies like regular audits and customer notifications about vulnerabilities. For individuals and businesses, adopting vigilant financial habits is essential to avoid falling victim to or inadvertently enabling check kiting. Frequent account reconciliation, ideally daily, allows for prompt identification of discrepancies in balances or transactions that might indicate kiting involvement. Limiting check usage in favor of electronic alternatives and monitoring accounts through tools help maintain tighter control over funds. Businesses should implement internal controls, such as requiring dual signatures on checks and segregating duties among employees to prevent unauthorized issuances or manipulations. Complementary to these strategies, basic detection tools can provide an early layer of oversight, though the focus remains on prevention through policy adherence. In the digital age, check kiting has evolved to exploit electronic banking channels, including mobile remote deposit capture (MRDC) and (ACH) transfers, allowing fraudsters to create artificial floats by depositing images of checks via apps before verification. This shift has reduced the scheme's viability in regions with advanced real-time processing, as systems like the 's service, launched in 2023, minimize processing delays that enable kiting by settling payments . However, it persists in underbanked communities where slower verification and limited access to instant payment networks create exploitable gaps. According to a 2025 survey, check fraud, including kiting variants, contributed to a substantial portion of banking losses, with institutions reporting increased incidents tied to digital channels. A notable development that gained renewed attention in 2025 was the viral social media trend from on platforms like and , where videos promoted an "infinite money glitch" involving the deposit of fake checks at ATMs to withdraw funds before clearance, often framed as a harmless hack. This led to FTC alerts in August 2025 warning that such "opportunities" using checks on social media constitute , prompting bank-wide warnings and a reported surge in attempted at institutions like First National Bank. Key challenges include social media's amplification of these schemes to younger demographics, who are increasingly targeted through addictive feeds and viral challenges, heightening risks of involvement in fraud. Cross-border digital kiting also poses issues, as fraudsters leverage international ACH networks to obscure trails across jurisdictions. A prominent recent case involved former Bank of O'Fallon executive Andrew P. Blassie, sentenced in September 2025 to 63 months in prison for a $2 million check-kiting scheme that inflated his personal account through repeated fraudulent deposits. Looking ahead, instant payment systems like are expected to further erode kiting opportunities by eliminating floats, though evolving tactics tied to online trends may drive rising prosecutions, as seen in JPMorgan Chase's lawsuits against participants in the 2024 glitch schemes.

References

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  6. https://www.ojp.gov/ncjrs/virtual-library/abstracts/check-kiting-detection-prosecution-and-prevention
  7. https://dictionary.cambridge.org/us/dictionary/english/check-kiting
  8. https://www.etymonline.com/word/kite
  9. https://researchportal.northumbria.ac.uk/files/135480847/More_Than_a_Species_of_Larceny_Fraud_Laws_and_Their_Uses_in_the_Eighteenth_Century.pdf
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  11. https://www.nytimes.com/1921/09/04/archives/bankers-hard-put-to-check-thefts-new-check-kiting-scheme-nets.html
  12. https://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=2957&context=dlj
  13. https://www.nytimes.com/1985/05/17/business/how-hutton-scheme-worked.html
  14. https://www.sechistorical.org/collection/papers/1980/1985_0805_HuttonGuilty.pdf
  15. https://www.latimes.com/archives/la-xpm-1985-05-03-mn-11827-story.html
  16. https://www.washingtonpost.com/archive/business/1993/07/17/real-estate-broker-pleads-guilty-to-bank-fraud-in-check-kiting-case/5e6a23e6-10d5-4964-926e-45c13daa0ff4/
  17. https://www.justice.gov/usao-wdpa/pr/ex-president-ohio-healthcare-management-company-pleads-guilty-59-million-check-kiting
  18. https://core.ac.uk/download/pdf/233182271.pdf
  19. https://www.chime.com/blog/what-is-check-kiting/
  20. https://gocardless.com/en-us/guides/posts/what-is-check-kiting/
  21. https://cusomag.com/2022/03/30/the-history-of-check-processing/
  22. https://www.justice.gov/archives/jm/criminal-resource-manual-807-check-kiting
  23. https://www.fincen.gov/resources/law-enforcement/case-examples/sars-identify-huge-check-kiting-scheme-auto-dealer
  24. https://www.occ.gov/publications-and-resources/publications/banker-education/files/pub-check-fraud.pdf
  25. https://www.dallasnews.com/news/crime/2019/06/18/exec-at-dallas-used-car-dealer-admits-role-in-50-million-scam-targeting-ford-banks/
  26. https://www.law.cornell.edu/uscode/text/18/1344
  27. https://www.law.cornell.edu/uscode/text/18/1005
  28. https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=PEN&sectionNum=476a.
  29. https://statutes.capitol.texas.gov/Docs/PE/htm/PE.32.htm
  30. https://www.fbi.gov/investigate/white-collar-crime
  31. https://www.justice.gov/archives/jm/criminal-resource-manual-1031-responsibilities-investigative-agencies
  32. https://www.europeanpaymentscouncil.eu/what-we-do/sepa-instant-credit-transfer
  33. https://www.ecb.europa.eu/paym/integration/retail/instant_payments/html/instant_payments_regulation.en.html
  34. https://www.cps.gov.uk/prosecution-guidance/fraud-act-2006
  35. https://laws-lois.justice.gc.ca/eng/acts/c-46/section-380.html
  36. https://www5.austlii.edu.au/au/legis/nsw/consol_act/ca190082/s192e.html
  37. https://www.mastercard.com/news/ap/en/perspectives/en/2025/evolution-of-fraud-and-scams-in-asia-the-need-for-a-unified-defence/
  38. https://www.bloomberg.com/news/articles/2024-06-21/sweden-led-europe-s-move-to-cashless-economy-now-it-faces-soaring-fraud
  39. https://www.justice.gov/archives/jm/criminal-resource-manual-602-procedures-requesting-extradition-abroad
  40. https://creativeplanning.com/international/insights/financial-planning/protect-yourself-from-financial-fraud-american-abroad/
  41. https://sqnbankingsystems.com/blog/how-to-detect-check-kiting-at-your-financial-institution/
  42. https://www.federalreserve.gov/paymentsystems/regcc-faq-check21.htm
  43. https://orbograph.com/the-check-21-act-and-its-impact-on-check-fraud/
  44. https://www.niceactimize.com/fraud-authentication-management/check/
  45. https://www.oncourselearning.com/resources/check-fraud-prevention
  46. https://ncua.gov/regulation-supervision/manuals-guides/federal-consumer-financial-protection-guide/compliance-management/deposit-regulations/expedited-funds-availability-act-regulation-cc
  47. https://bsaaml.ffiec.gov/manual/AssessingComplianceWithBSARegulatoryRequirements/04
  48. https://www.chabrowe.com/blog/2025/04/what-does-check-kiting-look-like-in-the-digital-age/
  49. https://www.frbservices.org/news/fed360/issues/071625/fednow-service-two-years-growth-innovation
  50. https://orbograph.com/the-drive-towards-digital-adoption-of-mobile-check-deposits/
  51. https://www.frbservices.org/binaries/content/assets/crsocms/news/research/2024-risk-officer-survey-results.pdf
  52. https://www.yahoo.com/news/articles/not-try-social-media-money-090806672.html
  53. https://www.firstnationalbanks.bank/co-sd/viral-check-kiting-never-trust-everything-online/
  54. https://consumer.ftc.gov/consumer-alerts/2025/08/social-media-trend-thats-actually-bank-fraud
  55. https://www.ndba.com/news/FTCWarnsConsumersAboutSocialMediaCheckFraudScam/
  56. https://www.njcriminaldefensellc.com/check-kiting-in-new-jersey-when-viral-banking-tricks-turn-criminal
  57. https://www.edweek.org/leadership/social-media-issues-for-kids-shaping-up-to-be-unpredictable-in-2025/2025/01
  58. https://www.stimson.org/2025/countering-digital-deception-national-responses-to-online-scams/
  59. https://fox2now.com/news/illinois/former-ofallon-bank-executive-sentenced-in-2m-check-kiting-scheme/
  60. https://www.npr.org/2024/10/29/nx-s1-5170331/jpmorgan-chase-infinite-money-glitch-atm-scam
  61. https://bankingjournal.aba.com/2025/04/fed-survey-most-fraud-losses-attributable-to-debit-card-check-fraud/
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