What is check kiting, and why is it considered bank fraud?

There are many kinds of financial fraud, many of which involve checking accounts. Most people are aware that writing bad checks on purpose to pay for goods and services can lead to criminal prosecution. Such fraud can deprive businesses and those selling property on the secondary market of the funds they deserve after the transfer of an asset.

Occasionally, people writing bad checks do not use the checks in question to pay for goods and services. Instead, they engage in a practice known as check kiting. When brought to the attention of regulatory officials, checking can potentially lead to bank fraud charges, which might be a federal offense.

What is check kiting?

The practice people refer to as check kiting essentially involves knowingly writing a check from an account with insufficient funds for the purpose of making a deposit into another account. The account holder may then spend those funds as though they are readily available in the account.

By the time the financial institution realizes that there aren’t sufficient funds to pay the deposited checks, the account holder may have burned through the entire amount of the bad check. That can lead to a very difficult situation for the financial institution involved, as recovering those funds can be an uphill battle.

Financial institutions frequently report such misconduct, especially when it involves thousands of dollars, and the individuals who issue those checks for insufficient funds to themselves could face prosecution in state or federal court.

Why is check kiting a form of bank fraud?

The assumed purpose of check kiting is to trick or manipulate a financial institution into letting someone spend money that they have not actually deposited at that institution. Financial crimes that target banking institutions are often subject to federal prosecution rather than state-level prosecution.

Sometimes, what appears to be a malicious attempt at check kiting was truly just a case of miscommunication or failing to properly track financial assets. People trying to get by during times of economic hardship may find themselves accused of check kiting and similar offenses.

Those facing white-collar criminal charges like check kiting or bank fraud allegations may need help preparing to defend against those allegations in court. A thorough review of financial records with an experienced legal team can help people fight allegations of check kiting when what really happened may have been as simple as miscalculating the available funds in one account.