What is kiting and how does it work
Kiting is a type of fraud where a financial instrument is used to obtain unauthorized credit. Kiting can take two forms: check kiting and money market kiting.
Check kiting occurs when a person writes a check against their account, but the funds are not yet in the account. The person then deposits the check into another account and uses the funds from that account to cover the first check. This process can be repeated multiple times, creating a “float” of funds that the person can use without actually having the money in their account.
Money market kiting is similar, but instead of using checks, the person uses money market accounts. Money market accounts are like savings accounts, but with higher interest rates. The person opens multiple money market accounts and transfers money between them to create a float.
Kiting is a form of fraud because it relies on the bank not catching the discrepancies in the account balances. If the bank were to catch the kiting, the person would be responsible for paying back all of the unauthorized credit, plus any fees and penalties.
How to spot a kiting scheme
There are some red flags that banks look for when trying to spot a kiting scheme. These include:
- Large and frequent transfers between accounts
- Accounts that are consistently close to or at their limit
- Unusual account activity, such as a high number of checks being written or deposits being made
If you see any of these red flags, you should report it to your bank. You can also report it to the National Fraud Information Center at 1-800-876-7060.
What to do if you’re the victim of a kiting scheme
If you are the victim of a kiting scheme, you should report it to your bank. You can also report it to the National Fraud Information Center at 1-800-876-7060.
How to prevent kiting schemes
There are some steps you can take to prevent kiting schemes:
- Keep a close eye on your account balances and activity
- Report any suspicious activity to your bank
- Be careful when sharing your personal financial information
If you suspect that someone is engaged in check kiting or money market kiting, you should report it to your bank. You can also report it to the National Fraud Information Center at 1-800-876-7060.
The consequences of kiting fraud
Kiting is a type of fraud where a financial instrument is used to obtain unauthorized credit. Kiting can take two forms: check kiting and money market kiting. Check kiting occurs when a person writes a check against their account, but the funds are not yet in the account. The person then deposits the check into another account and uses the funds from that account to cover the first check. This process can be repeated multiple times, creating a “float” of funds that the person can use without actually having the money in their account. Money market kiting is similar, but instead of using checks, the person uses money market accounts.
Money market accounts are like savings accounts, but with higher interest rates. The person opens multiple money market accounts and transfers money between them to create a float. Kiting schemes often go undetected by banks, which can lead to significant losses for consumers. In addition, those who engage in kiting schemes may also face criminal charges and penalties. There are some steps you can take to prevent kiting schemes, including monitoring your account activity and reporting any suspicious behavior to your bank. If you think someone might be engaged in a kiting scheme, you should contact your financial institution immediately.
Prevention tips for avoiding kiting schemes
There are some simple steps you can take to help prevent kiting schemes:
- Keep a close eye on your account balances and activity
- Report any suspicious activity to your bank
- Be careful when sharing your personal financial information
If you take these precautions, you can help reduce the risk of becoming a victim of kiting fraud.
