check-kiting
Kiting or check-kiting is 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. For example, if a person writes 100 checks for multiple bank accounts, totaling a significant amount of money, there could be a temporary high balance during the float period when the underlying banks process these checks, allowing the person to withdraw cash from these bank accounts with insufficient funds to cover the withdrawal.
In U.S. v. Stone , the Sixth Circuit 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. In U.S. v. Flowers , the Sixth Circuit 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 act of kiting is illegal . Because the check that has been deposited increases the funds available, the Sixth Circuit in U.S. v. Flowers 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 Seventh Circuit 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 . Additionally, check-kiting could also be a punishable crime under state law, such as California Penal Code § 476a .
To counter kiting activities, many financial institutions have a waiting period before deposited checks are available.
[Last reviewed in January of 2025 by the Wex Definitions Team ]
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