I have a customer of the bank who I suspect, well pretty much know is conducting a cash kite. Our customer has (1) account with us and is writing checks out of his account with us (no funds there actually negative balance) to (4) different gas stations then coming back to bank and depositing cash into account to cover other checks before or when they are presented for payment and to keep them from being returned insufficient. This is an on going process (daily). This customer has written up to (80) checks between these (4) gas stations in a (1) month period of time to aid this kite. Is there possibly going to be a loss to our bank? I can not get upper management to close this customer. Any help would be appreciated.

If he is making cash deposits and your bank is paying checks based on collected funds, then no, there isn't a risk to your bank on that count. However, it certainly would be suspicious activity that should be reported if it meets thresholds, and you may very well be asked by an examiner why it was that you decided to keep the account open when you had identified suspicious activity. Furthermore, if they are willing to do this, then what would they not be willing to do that would put the bank at risk?

Thanks Jokerman, I was sure this case, which I did file on for suspicious activity, would get plenty of looking at when the examiners come in a few months. The amount is getting to be a pretty big amount and is elevating each month. What if he stopped writing these checks to these (4) gas stations and then wouldn't it leave us at a loss?

You're welcome.

My statement that your bank was not at risk was based on the premise that he made cash deposits in order for you to pay the check - as long as you are paying checks based on good funds (and cash is more than good - it's perfect), you're not at risk.

(In a traditional kite, a bank incurs losses when it pays checks on the basis of deposits that are returned.)

You would be ok, because you're only paying the checks against the cash that he has deposited, correct? The service stations are the ones that would have to worry - if you didn't pay the check they would be out.

Thanks alot for the input. I understand that our bank really isn't into a big loss, if any. I am more concerned about the examiners coming in and seeing this customers account still open with this same activity going on. This customer has already been filed on in the past for check kiting. I just can't get management to let him go. (As they say) that's one of my good customers. I say then tell them to stop this crap.
Thanks Again.

We always have the same issue - no one wants to close them because of the fee income off of the NSFs, etc - but just wait until the account gets charged off for $400 - $500 - then they complain and whine and itch and moan and carry on something fierce - so we just smugly smile and say....

That is exactly what I have been getting. TexTRainer it's like you are a mind reader. Maybe we will get a great big fine and then there goes my job. Have a great day.

You atarted the thread with the information that the account's overdrawn. If that's the case, any time the bank decides to pull the plug and bounce a check, this guy's cash kite is headed for that infamous kite-eating tree, Charlie Brown.

But it would be the gas stations that are going to get indigestion from the kite (other than the overdrawn payments that the bank has approved).