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This example is typically complicated by regular business
transactions in the accounts at the same time. An example of a check
kiting scheme is as follows; Mr. Jones deposits a worthless check
for $10,000 in the Eastern Bank drawn on the Western Bank. It will
take six days for that check to be paid or returned. Two days later,
Mr. Jones deposits $13,500 in worthless checks in the Western Bank
drawn on the Northern Bank. Two days later, Smith deposits a number
of worthless checks in the amount of $27,300 in the Northern Bank
drawn on the Eastern Bank. Five days later because of the weekend,
Smith deposits $51,345 in worthless checks in the Eastern Bank drawn
on the Western Bank. And it keeps going around . . . . After the balance
in the banks builds to an amount in excess of $50,000, Mr. Smith cashes
checks drawn on each balance in other banks outside of the check kiting
target banks. Each bank pays the checks. All checks in the payment
process are returned to the depository unpaid for insufficient funds.
There are many variations of the check kiting swindle, but the basic
method of operation is always the same. Because losses sustained by
the banks resulting from the payment of uncollected items of deposit
are typically excluded from coverage in the financial institution
bond, it is crucial that everyone in the bank understand just what
a check kiting racket is and how to prevent such losses.
Generally, do not pay checks drawn on uncollected items of deposit
on any account which has been with the bank for nine months or less,
take care to check every account which has a constant regular ever-increasing
deposit, and be especially careful of deposits drawn on accounts of
the same person or firm in another bank. Learn the DANGER signs of
a check kite swindle:
• A regular deposit every day or every two, three,
or four days.
• The same person or same handwriting as payee and drawer.
• A high uncollected balance to a low collected balance.
• Deposits and/or withdrawals in even amounts.
• Frequent account balance inquiries.
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