Check-in is a form of checking fraud , which involves 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 .

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 Reviews another account in Reviews another bank, aussi with non-sufficient funds , with the second check serving to cover the Non-existent funds from the first account. [1] The purpose of checking kiting is to falsely inflate the balance of a checking account in order to allow written checks to clear that would otherwise bounce. [2] 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 – in effect a payday loan – it s’intitule playing the float . [4]

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 often 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 scales, 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 in order to increase the interest paid by their banks. In recent years, Criminals have started to take advantage of the cheats through the auctions. [5]

Circular kiting

Circular kiting describes forms of kiting in which one or more additional banks serve as the rental of float, and involve the use of multiple accounts at different banks. In icts Simplest form, the kite, Who has two or more accounts de son own at different banks, writes a check on day one to himself 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 his bank to account and deposits it to his account at Bank to give artificial funds allowing the check he wrote a day earlier to clear. This cycle repeats until the offender is caught, or until the offender deposits genuine funds, And usually going unnoticed. [4]

Complex versions of this scheme have been found to have two separate people, each with a different bank, constantly writing checks to one another, or a group of individuals. Some kiting rings involve offenders posing as large businesses, making masking their business as normal business transactions and making banks inclined to waive the limit of funds made available.

Yet another variation called the ‘endless kite’ involves checks imprinted with the logo, address, and name of Bank. Is sent to Bank B, which does not recognize the account and bank name, again returning the instrument to the clearing house, where the check cycles endlessly. [6]

Retail-based kiting

Retail-based kiting involves the use of a financial institution to provide financial services to the public. In these cases, the kiter writes check out one or more places of retail (usually supermarket (s)) that offer cash back in addition to the purchase of a courtesy to their patrons. Following the transaction, the kiter deposits the cash received back into his / her bank account in order to provide sufficient funds for other check to clear. This action is repeated as necessary until legitimate funds may be deposited into the account.

Concretely, assume an individual has $ 10 in their bank account and no cash, but wishes to purchase an item costing $ 100. Here is how the fraud is accomplished:

  • First, the individual writes a bad check for $ 100, and uses it to purchase the item (say check # 1 on day T-1) – the individual is now insolvent, as they owe $ 100, but only have $ 10 in the bank. However, the check has not yet cleared.
  • Second, they go to a retail establishment and write another check for $ 100 and cash it (more likely to buy $ 100 more than that), say check # 2 on day The kiting.
  • It is a good idea to make sure that you have the right amount of money to check the amount of money you pay. clear.
  • This process can be repeated, with the amount possibly increasing (as in a Ponzi scheme ).
  • If the kiter then gets $ 100 in cash on day T + 1 and deposits it in their account, check # 2 clears and the victims do not lose money, and are none the wiser.
  • If, on the other hand, the kiter does not get enough cash and does not continue kiting, then check # 2 (or some further check, if it has a few iterations) bounces, and the retail establishment has been defrauded Lost $ 100 cash in exchange for a bad check.

The principle of retail kiting Is That by giving cash (qui est time immediately available, and Whose deposits clear faster than checks do) in exchange for a check, the retail establishment is providing good 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 sale with a check, and returning it promptly for a cash refund, followed by depositing that cash into the transactional account. This item is not available in your country.

Retail kiting is more common in suburban areas, where multiple supermarket chains exist within close 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. HOWEVER, a 1999 episode of the CBS program Real TV Showed video monitoring of a man purchasing a single item with a check at a supermarket, Obtaining $ 50 cash back, up the allowed by the store, and Depositing the cash Into His account at a bank Branch in order to prevent the other check from bouncing. According to the show, an employee has his behavior suspicious reported to the police, and the video was used in his prosecution.

Corporate kiting

Corporate kiting involves the use of a large kiting scheme, which may involve the payment of money or earn interest. If you have any questions or concerns, please do not hesitate to contact us. [7] This was the case with EF Hutton & Co. in the early 1980s. [8]

Legal implications of check kiting

Check kiting is illegal in many countries. [9] However, a majority of countries do not have a float system and are not paid until they are cleared, so check kiting is impossible.

United States

Selon the United States Department of Justice , check kiting can be prosecuted under Several Existing Laws Including Those contre bank fraud ( 18 USC  § 1344 ), misapplication ( 18 USC  § 656 ), or required entries ( 18 USC  § 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 backgrounds have received stiff sentences. In addition to the federal penalties, [10]

Although the United States prosecutes [11] some paper hangers under federal law, [12] most issuance of bad checks in the United States is prosecuted as a state offense.

Laws vary from state to state, purpose One example is Ohio Revised Code 2913.11 (2) (B), qui states: “No person, with purpose to defraud,` shall issue or transfer or due to be Issued or Transferred a check or other negotiable instrument , Knowing That it Will Be dishonored gold Knowing That person hAS has ordered or will order stop payment on the check or other negotiable instrument. ” Oregon, Oregon, Oregon, Oregon, Prince Edward Island, Prince Edward Island, Prince Edward Island, Prince Edward Island, Ohio is a misdemeanor , a large checks or multiple checks within a six-month period aggregating to large amounts make it a 5th-, 4th-, or 3rd-degree felony . [13]

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 at a later date. For example, Indiana ‘s check deception statute states that the country of origin, ……………… ” In addition, it is not a criminal offense to make a payment or to make a payment to the insured person. ‘

Generally the intent to defraud is an element of the crime; therefore, When someone is paying by check Where They Know That They Do not-have enough money to cover the check Then, aim will-have Within, say, 3 or 4 days (like a person writing a check just before Direct deposit of Their paycheck) , If they inform the person that the check would bounce, and the party deposits it anyway, while they would be liable for service charges and possibly fees, informing the person receiving the check Was not intended.

See also

  • Credit card kiting
  • Bank fraud
  • Check fraud
  • Federal Bureau of Investigation (FBI)
  • United States Secret Service

References

  1. Jump up^ Congress and the rent-seeking society – Google Books . Books.google.com . Retrieved 2010-08-01 .
  2. Jump up^ Criminal Law – Google Books . Books.google.com . Retrieved 2010-08-01 .
  3. Jump up^ “Paperhanging – Definition” . The Free Dictionary . Retrieved November 1, 2013 .
  4. ^ Jump up to:b Lundin, Leigh (2013-06-02). “The Digital Detective, Banking part 1” . Financial Fraud . Orlando: SleuthSayers . Retrieved 5 August 2013 .
  5. Jump up^ “Fake Checks | Consumer Information” . Www.consumer.ftc.gov . Retrieved 2016-02-27 .
  6. Jump up^ Lundin, Leigh (2013-06-09). “The Digital Detective, Banking Part 2” . Financial Fraud . Orlando: SleuthSayers . Retrieved 5 August 2013 . The Endless Kite
  7. Jump up^ In Good Faith – Google Books . Books.google.com . Retrieved 2010-08-01 .
  8. Jump up^ The criminal elite: understanding … – Google Books . Books.google.com . Retrieved 2010-08-01 .
  9. Jump up^ “Check Kiting | Accountant Town” . Accountant Town . Retrieved 1 November 2013 .
  10. Jump up^ “807 Check Kiting” . Justice.gov . Retrieved 2010-08-01 .
  11. Jump up^ Identity theft and fraud ArchivedAugust 6, 2009, at theWayback Machine.
  12. Jump up^ “Bank Fraud” . Law.cornell.edu. 2010-06-28 . Retrieved 2010-08-01 .
  13. Jump up^ Anderson’s Ohio Revised Code
  14. Jump up^ “Indiana Code” . In.gov. 1990-12-31 . Retrieved 2010-08-01 .