Kiting or check-kiting is defined as the practice of covering a bad check from one bank account to another. Persons with multiple bank accounts use this advantage because it takes multiple days to process checks. The check that has been deposited increases the fund available. The act of kiting is illegal. To counter kiting activities, many financial institutions have a waiting period before checks are deposited. In the Sixth Circuit, the Court defined check-kiting as drawing checks on an account from one bank and depositing them in an account in the other bank when both bank accounts have insufficient money to cover the amounts drawn; see U.S. v. Stone. The Court in United States v. Flowers decreed that kiting is an offense where the offender tricks two or more banks into inflating account balances by drawing money from insufficiently funded bank accounts. The Court stated that the offender in essence will be giving themselves their own unauthorized, unsecured, and interest-free loans, put banks at risk for funds, and short the banks’ assets. In United States v. Norton, the Court stated that check kiting could violate the federal bank fraud statute, 18 U.S.C. §1344 if the victim is a federally insured financial institution.
[Last updated in July of 2022 by the Wex Definitions Team]