Check Kiting - SAR Filed

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Question:

When filing a SAR for check kiting, part of our process is to set an alert on our teller system that directs tellers not to accept deposits from the suspect customer that include checks the customer has drawn on accounts in other banks. We do this instead of closing the account. Does anyone else do this? If so, what do you tell your customer? I know we cannot say anything about the SAR or that we have knowledge they are kiting, so what else can we actually tell them for an explanation?

Answer:

Answer by Ken Golliher:When a customer kites your bank, makes an unsecured, uncompensated, unnegotiated loan under circumstances that make it a federal crime: bank fraud. I would suggest you close the account and worry about filing a SAR later.

While it is true that you cannot tell them about filing a SAR, you can certainly say they have developed a pattern of consistently drawing on uncollected funds. That's the real issue.

The risks of leaving such an account open are quite real and there are no potential rewards. The only effective way to mitigate the risk is to close the account.

Answer:

Answer by John Burnett:If you leave the account open and refuse checks drawn by the customer on Bank A, it won't take long for your customer to tie a different string on his kite and fly it from Bank B. Ken provided good advice. Sever the relationship to avoid getting caught when the kite tumbles to earth.

First published on BankersOnline.com 11/09/09