What is check kiting?

Check kiting is a fraudulent scheme that exploits the time it takes for checks to clear between banks. This technique involves depositing a check from one account into another, often with insufficient funds in the issuing account, then withdrawing the funds before the check has cleared. The key to this deception lies in the manipulation of the timing between the deposit and the check's clearance, creating the illusion of available funds that do not actually exist.

This practice can create a temporary cash flow boost for the perpetrator, allowing them to access money they don’t truly have. The fraudster essentially generates cash through a series of delays and transfers, knowing that the checks will not clear for several days, which can make it appear that they have more assets than they realistically do.

In contrast, creating cash by manipulating physical checks may refer to altering checks, which is not the operational definition of kiting. Making deposits into investment accounts does not involve the deceptive lag between deposit and clearance, and using checks as identification is unrelated to the essence of check kiting. The focus of check kiting is solely on exploiting the timeframe involved in check processing to create the appearance of liquidity.