How do other Security Officers handle this situation: A customer has a checking account that they know will be going NSF. So they take a check drawn on our bank, cash it another bank, and then run over and deposit the cash here. Then they do the same thing tomorrow...then the next day, etc...until they get funds to cover the original shortfall. Our risk is minimal, as the deposit here is cash, but we view this type of activity as unfavorable, to the point that once it gets over $ 5,000, a SAR is filed. I am curious how other banks view this activity, and how they respond...also, we give the customer 10 days notice and close the account.

It sounds to me like you are on top of all things concerned.

I find myself with the same dilemma. Our customer only does it once or twice a month. I have called him on it, and he was supposed to stop. I don't think he thought I would continue to watch, so he has continued the activity. I will probably give him 10 days and close the account.

Where is the cash kite explanation ???

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Where is the cash kite explanation ???

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I think the original poster did a fine job in defining a "cash kite".

At the time the check is presented to the other bank for cashing, your customer does not have sufficent funds to pay that check if it were to be immediately presented. While you are in a good position because the deposits are cash, sooner or later this will fall apart. Protect yourself now.

Recently, I had a case in which a customer was cashing checks daily at various businesses and depositing cash to float her businesses. Her account was opened as a personal checking account. Her deposit totals were in excess of $30,000 a month. We closed her account for unacceptble account practices.

I recently had 2 cash kites similar to this; customers go to grocer, but pack of gum and write check for $101, getting $100 cash back (max allowed at grocer). We closed accounts.

Were they then depositing the cash into another checking account to avoid being overdrawn? If not, I don't see what is wrong with writing a check with cash-back. Am I overlooking something obviously wrong?

It is a difficult concept to visualize. A daily float is created when the customer goes to various businesses and cashes checks. The cash is then deposited to the checking account. Typically, the amount of the kite is near the daily float, hence the need to make the daily cash deposits.

So your answer on how to handle a cash kite

Once again how does the Security Officer handle a cash kite,i.e., what is said to the customer?

I think Jokerman has the procedures nailed. This customer is wasting your time and is clearly capable of actions that might amount to a financial threat. Waiting until the cummulative totals reach a SAR threshold means you are preparing to waste a much greater amount of time.

If I was a board member and when this SAR was reported to us I learned that we had allowed $100 - $200 transactions to accumulate to $5,000, but done nothing about it, I would ask some pointed questions. Because, now, someone is wasting my time.

Security Guy-
Regarding the Cash kiting issue you may want to check out (Ad removed) they have a video on that subject that can be helpful. If you have questions on this subject chances are your tellers do to. Check them out.

Although this is not true Check kiting and the risk is really on the other party cashing the checks, if I knew this was happening I would treat it as a check kiting.

Are you all saying you'll close the account even though you don't see where your institution is at risk of losing money? I'm watching an account right now that deposits over $2000.00 cash everyday and then about ten checks to tow different parties clear his account. This happens everyday. I advised closing the account, but our Security Dept. says they won't do anyting until he goes overdrawn. I think the money is lost then. What do you all think?

IMO, if a bank detects activity in an account that is likely to evolve into a loss for the bank, the bank should act to close the account.

If this were a true check kite, with other banks involved, I'd imagine your security officer would "pull the plug" before incurring losses, if possible.

Cash kites are a little tricker to keep aloft, but they have some of the same characteristics as a check kite -- larger and larger amounts are involved over time, and eventually the customer pulls out more in one day than gets deposited, and the bank loses.

Depositing cash and immediately issuing checks as decribed in post #315776 (Anonymous, above) can also be a handy way to launder money. Your security officer should be concerned about that aspect of the account, if nothing else.

I am working a case like this now. Our customer writes checks to his wife who deposits them to her account at another bank. she then goes to several branches of her bank, makes cash withdrawals and deposits the cash in several branches of our bank.

This began in December in the $700 range and is now over $10K a day. Both banks are filing CTRs.

We are closing our account even though we have no exposure for abuse of account privileges. A SAR will be filed. I am sure the other bank is doing the same thing.

Consider the time involved in researching the cash kite described by Fraudman, and double it because of the two banks involved. Figure the cost of that effort, and balance it against the minimal "real" balance in the two accounts, and the risk of the kite falling apart, leaving your bank holding a loss.

Now think about whether your bank would want to keep such accounts open, waiting for an overdraft.

You guys totally jinxed me!

I stumbled across one and you're right: it's a hard concept to visualize.

I've got someone that makes cash deposits and in the same day writes checks to the casino's for cash. I've made a spreadsheet showing the days she makes deposits vs. the days the checks are written (not cleared). They pretty much broke even. Should I go back farther to see what "triggered" it....because right now, she's doing enough to keep it afloat. Something had to have snowballed it.

I also did a comparison of activity from last year at this time. While she was doing it, to a tune of about $1,500.00 a month, she's now evolved to $28,000.00 in a month.

Where would she have benefitted from it?

Thanks for everyone's help and experience? (oh and yes, I'll be closing her and SAR filed but I want to learn the WHY's of it all!)

Real simple why Swedish; she needs cash to feed a gambling habit!

I had one just llike this!

I guess where I'm having a hard time is trying to pin down where she benefited from it. If she's writing checks for $1,000.00 and depositing cash of $1,000.00, where's the profit?

I'm assuming the more I dig, I'll find something. But I don't get it. Sometimes: I'm kinda dense. (But sshhh don't tell my coworkers!)

Likely wherever she is cashing the checks has a couple of days in processing before their clearing her account, so as long as she stays a couple of days ahead, she's ok - if they presented the checks as soon as they were cashed would probably be a different story. By building in a couple (or more)days of float, she probably has given herself a few $1000 to play with.

Look at the dates written on the checks, not necessarily the dates paid; granted this is not always correct but as TexTrainer said, it may show the processing time between the two.....

And if you are concerned the check dates might be manipulated, look at the dates the checks were deposited. Casinos don't hold checks for deposit any longer than absolutely necessary.