Steps to Prove Check Kiting

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Question:

What are the compliant steps to prove a suspicious account for check kiting?

Answer:

It would be your ability to demonstrate that a customer is using two or more institutions, to move money back and forth, and using the float to make it appear that they have available funds when really their balance has been artificially inflated by writing worthless checks. Steps you could take include reviewing past statement history and documenting examples of the following:

The total debit amounts are equal or close to the total credit amounts
Frequently using round dollar amounts
Unusually high number of credits and debits per day or week with no apparent purpose
Deposits and withdrawals are occurring between the same institutions

The best step to take when suspecting a kite is to place Regulation CC holds on the checks to ensure the funds clear (an exception hold for reasonable cause to doubt collectibility). This will more than likely confirm your suspicion. Remember, if the total dollar amount involved in the kite exceeds $5,000 you would be required to file a SAR and include your findings in the narrative.

First published on BankersOnline.com 4/4/05