What is check kiting?

What is check kiting?

• A. Counterfeiting
• B. Forgery
• C. Passing checks back and forth between institutions before they clear, exploiting float
• D. Writing checks on closed accounts

Answer: (C)

Check kiting is a fraudulent scheme that exploits the time it takes for checks to clear between banks. A person deposits a check at one bank and almost simultaneously deposits another check at a second bank, typically drawn on the other bank, creating the appearance of available funds at both institutions before either check actually clears. By moving money back and forth and taking advantage of the float—the delay before funds are officially posted—the perpetrator can make it seem like there are sufficient funds when there aren’t. This is not about creating fake money or forging signatures, and it’s not simply writing checks on a closed account; those other actions involve different deceit or immediate insufficiencies, whereas check kiting relies on the clearing float to simulate liquidity.

Check kiting is a fraudulent scheme that exploits the time it takes for checks to clear between banks. A person deposits a check at one bank and almost simultaneously deposits another check at a second bank, typically drawn on the other bank, creating the appearance of available funds at both institutions before either check actually clears. By moving money back and forth and taking advantage of the float—the delay before funds are officially posted—the perpetrator can make it seem like there are sufficient funds when there aren’t. This is not about creating fake money or forging signatures, and it’s not simply writing checks on a closed account; those other actions involve different deceit or immediate insufficiencies, whereas check kiting relies on the clearing float to simulate liquidity.