Check kiting or check kiting is a form of check fraud, which involves using a float to use funds that are not in check or other bank accounts. In this way, instead of being used as a negotiable instrument, the check is misused as an unauthorized form of credit.
Kiting is usually defined as deliberately writing a check for a value greater than the account balance of an account in a bank, then writing a check from another account at another bank, also with insufficient funds, with a second check serving to cover no funds from the first account. The purpose of check kiting is to inflate the balance of a checking account to allow a written check for cleaning which would otherwise not bounce off. If the account is not planned to be refilled, then fraud is colloquially known as hanging paper . If writing checks with insufficient funds done in the hope they will be borne by the payday - on effect payday loans - it's called float play.
Some forms of check fraud involve the use of a second bank or a third party, often a retail place, to delay the absence of funds in a transactional account on the day of the check as it is evident in the bank. Such acts are often committed by bankrupt or temporarily unemployed individuals or small businesses seeking emergency loans, by new businesses or businesses that are struggling for non-interest financing while intending to improve their balances, or by pathological gamblers who have the hope of depositing funds after winning. It has also been used by those who have some original funds in a flowering account, but who artificially inflated their balances to increase the interest paid by their bank. In recent years, criminals have begun to take advantage of float checks to provide fake checks through requested online auction users.
Video Check kiting
Circular reading
Kiting curl describes a kiting form in which one or more additional banks function as buoy locations, and involves the use of multiple accounts in various banks. In its simplest form, kiter, which has two or more accounts in a different bank, writes the check on the first day for itself from Bank A to Bank B (this check is referred to as overpay ), so funds are available that day at Bank B is enough for all checks as it is clear. On the next business day, kiter writes a check in their Bank B account and hands it to his account at Bank A to provide a counterfeit fund that allows the checks they wrote the day before to be removed. This cycle repeats until the perpetrator is caught, or until the perpetrator deposits the original funds, thus eliminating the need to play a kite, and is usually overlooked.
A complex version of this scheme has taken place involving two separate people, each with accounts in different banks, constantly writing checks on one another, or a group of individuals who write checks in circles, making detection more difficult. Some of the kiting rings involve offenders disguised as big business, thus covering their activities as normal business transactions and making banks tend to ignore the available funding limits.
Yet another variation called 'endless kite' involves checks listed with the logo, address and name of Bank A but Bank B's routing number. Bank A does not recognize the routing number and returns the check to the clearing house, where it is sent to Bank B , who does not recognize the account and bank name, returns the instrument back to the clearing house, where the check cycle is relentless.
Maps Check kiting
Retail-based sharing
Retail-based kiting involves using a party other than the bank to unknowingly provide temporary funds to account holders who do not have the funds needed to be checked for clean. In this case, Kiter writes a check to one or more retail places (usually supermarkets) that offer money back in addition to the amount of purchase as a courtesy to their customers. After the transaction, kiter keeps the cash received back to his bank on the same day to provide sufficient funds for other checks to be deleted, while the checks written that day will remove one business day or more later. This action is repeated as necessary until a valid fund can be put into the account.
Concretely, suppose someone has $ 10 in their bank account and no cash, but wants to buy something for $ 100. Here's how the fraud is done:
- First, the individual writes a bad check for $ 100, and uses it to purchase the item (for example, tick # 1 on T-1 day) - the individual is now bankrupt, because they owe $ 100, but only have $ 10 in the bank. However, the check has not been cleared.
- Secondly, they go to a retail company and write another check for $ 100 and redeem it (most likely buy a certain amount of goods, and write a check for $ 100 more from that), say check # 2 on day 0 - this is kiting.
- They then take the cash and keep it in their account, which now has $ 110, which is enough for the first check (check # 1) to remove, but after this there is insufficient funds for check # 2 (kite) to clean up.
- This process can be repeated, with possibly increased numbers (as in the Ponzi schema).
- If kiter then get $ 100 in cash on T day 1 and keep it in their account, check # 2 clearly and the victim actually does not lose money, and no one is wiser.
- If, on the other hand, kiter does not get enough money and does not continue kiting, then check # 2 (or some further inspection, if it continues several iterations) bounces, and the retail establishment has been duped - they lose $ 100 cash by reward bad check.
The principle of retail kiting is that by providing cash (which immediately is available, and whose payments are faster than checks) instead of checks, retail companies provide check-cashing and pickup services credit risk on checks - may be rejected.
Another version of this scheme involves purchasing goods from a retail place by check, and returning them promptly for a refund of cash, followed by depositing the cash into a transactional account. This is more difficult lately, as more retail places will delay a refund on purchases made by check.
Retail hijacking is more common in suburban areas, where many supermarket chains are in close proximity. Although more difficult to detect and be tried, it involves a smaller amount of cash than circular kiting, and therefore a lower threat. However, the 1999 episode of the CBS Real TV program showed video surveillance of a man who bought one item by check in a supermarket, earned $ 50 cash back, the maximum allowed by the store, and deposited cash into his account at the branch in-store bank to prevent another check bouncing. According to the show, an employee found his suspicious behavior reporting to the police, and the video was used in his prosecution.
Company tracking
Kiting companies involve the use of large kiting schemes that may involve millions of dollars to secretly borrow money or earn interest. While restrictions are often placed on individuals such as how much money can be saved without holding a temporary, the company can be given direct access to the funds, which can make the scheme unnoticed. This is the case with E. F. Hutton & amp; Co. in the early 1980s.
Legal implications of check kiting
Check for illegal kiting in many countries. However, the majority of countries do not have a buoy system and unpaid checks until they are cleaned up, so check kiting is not possible.
United States
According to the US Department of Justice, check kiting can be prosecuted under several existing laws including those against bank fraud (18 USC Ã,§Ã, 1344), misapplication (18 USCÃ,§Ã, 656), or entries required (18 USC Ã, Ã, § 1005). This can attract fines of up to $ 1,000,000.00, imprisonment up to 30 years, or both, and many first-time offenders without a criminal background have received stiff penalties. In addition to federal penalties, state laws often provide alternative civil and criminal consequences.
Although the United States prosecutes several paper hangers under federal law, most of the issuance of bad checks in the United States is prosecuted as a state offense.
Laws vary from state to state, but one example is Ohio Revised Code 2913.11 (2) (B), which states: "No person, for the purpose of deceit, shall publish or transfer or cause to be excluded or transferred checks or negotiated other instruments, knowing that it will be rejected or knowing that someone has ordered or will order to stop payments on checks or other negotiable instruments ". Usually, passing a bad check in Ohio is a minor offense, but a large check or multiple checks in a six-month period combined into a large number make it a 5, 4 or 3 crime, depending on the amount involved.
Some countries protect careless people by making intentions to deceive an element of crime, or to relieve them of the punishment of paying a check in the future. For example, the Indiana fraud check statement states that it is a defense if the person issuing the check "pays the payee or holder the amount to be paid, together with protest fees and any fees or service fees... within ten (10) days after the date of delivery by the payee or the holder of a notification to the person whose check, draft, or order has not been paid by the credit institution. "Furthermore, it is not a crime if" the payee or the holder knows that the person has insufficient funds to ensure payment or check , draft or order is no longer valid ", or" the insufficiency of funds or credit proceeds of the adjustment for that person, the account by the credit institution without notice to the person. "
Generally intent to deceive is an element of crime; Therefore, when someone pays by check where they know they do not have enough money to close the check, but will have in, say, 3 or 4 days (like the person who wrote the check before the deposit directly from their salary), if they tell the person that the check will bounce off, and the party keeps depositing it, while they will be responsible for the cost of the service and possibly the fee, informing the person receiving the check that it will bounce if deposited immediately will generally represent evidence that the fraud is not intended.
See also
- Credit card launch
- Bank fraud
- Check out fraud
- Federal Bureau of Investigation (FBI)
- United States Secret Service
References
Source of the article : Wikipedia
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