1.2.3.5.1.3 Check Kiting or Altering Checks
Check kiting is an illegal activity in which a person takes advantage of the time that it takes for a check to clear between two banks to draw out non-existent funds.
In 2004 the Check Clearing For the 21st Century Act was passed. This act set up a process for paper checks to be converted to electronic images and routed and cleared (paid) almost instantaneously. Before passage of the Act, checks took several days (or more if mailed) to be cleared. This float time allowed unscrupulous persons to move non-existent funds around from account to account in time to cover draws on those funds. A simple example is the best way to understand the concept.
Example: Bob has a checking account at Bank A that pays his bills by directly taking funds from his account. This month, he doesn’t have enough money to cover his bills, so he writes a check to himself from a checking account he has at Bank B. Unfortunately, he currently has no money in his Bank B account but knows his paycheck will be deposited into his Bank B account tomorrow, which will cover the check he just wrote. His action would be considered check kitin