Check Kiting, Improper Loans to Banking Officers, and Overdrafts

Check Kiting
Check kiting is a crime that involves one or more individuals who utilize checking accounts at two or more financial institutions. The purpose of using two or more institutions is for the systematic exchange of checks written in similar amounts. The individual uses the lag time that it takes to clear checks through the Federal Reserve System to use and collect the money. The individual in essence obtains money that he actually does not have in his account. Often times the individual will have the money in his account in a few days, but in the mean time is able to basically obtain an interest free loan from the financial institutions involved in his scheme.

In October 2004 Congress passed a new law that substantially cut the lag time it takes for a check to clear. The rationale behind passing the federal law was to prevent check kiting schemes.

An individual or individuals may be charged with check kiting as well as wire, mail, and bank fraud depending upon the facts of the case involved. An individual connected to a financial institution that participates in such a scheme may also be subject to federal prosecution under several other statutes