Kiting is a form of check fraud that exploits the time delay between when a check is deposited and when it actually clears, meaning the funds genuinely become available and collected. A person engaged in kiting writes a check against an account that does not actually have sufficient funds to cover it, then deposits another check, often from a different bank or account, to cover the shortfall before the first check is presented for payment, repeating this cycle to keep the scheme afloat without ever having the real money the checks claim to represent.
The term comes from the image of a kite staying aloft only as long as wind, or in this case, a continuous stream of new deposits, keeps feeding it; the moment the cycle of new deposits stops or a bank catches on, the entire scheme collapses, typically leaving one or more banks with uncollectible losses.
Kiting in plain terms
A classic example of kiting involves writing a check for a mortgage payment when the checking account does not have enough money to cover it, but counting on depositing a paycheck, or another check, before the mortgage company actually presents that first check for payment. If the timing works out, the paycheck clears just in time to cover the mortgage check, and no one notices anything unusual; kiting becomes a more serious, deliberate scheme when someone systematically exploits this timing gap using multiple accounts across multiple banks, rather than simply making an honest timing mistake on a single occasion.
How a check kiting scheme typically works
- The perpetrator opens accounts at two or more different banks.
- A check is written from Account A for more money than it actually contains, and deposited into Account B.
- Before Account A's check clears, a check is written from Account B, again for more than it actually contains, and deposited back into Account A to cover the original shortfall.
- This cycle repeats, with the amounts often growing over time, until the perpetrator either obtains genuine funds to cover the scheme, or the banks detect the pattern and the scheme collapses.
Why kiting is difficult to sustain
Kiting requires an ever-increasing cycle of deposits to stay ahead of checks clearing, since no genuine new money ever actually enters the system through the scheme itself, only the appearance of money moving between accounts. Banks have become increasingly effective at detecting kiting through automated monitoring that flags unusual patterns, such as frequent large deposits and withdrawals between the same linked accounts, which is why successful, sustained kiting schemes have become considerably rarer as detection technology and interbank data sharing have improved.
Legal consequences of kiting
Check kiting is a serious form of bank fraud in most jurisdictions, carrying significant criminal penalties including substantial fines and imprisonment, since it ultimately defrauds whichever bank is left holding an uncollectible check once the scheme collapses, and banks that suffer losses from a kiting scheme generally pursue both criminal prosecution and civil recovery against the perpetrator.
Modern real-time payment processing and interbank data sharing have made the timing gap that kiting depends on considerably narrower than it once was, which is one reason this particular form of fraud has become significantly less common than it was in the era of slower, purely paper-based check clearing.
Banks that detect a suspected kiting pattern will typically freeze the involved accounts immediately and report the activity to relevant authorities, since allowing the scheme to continue only increases the eventual uncollectible loss once the cycle of deposits inevitably breaks down.
Legitimate businesses occasionally fall into an unintentional pattern resembling kiting simply through poor cash-flow timing, which is why banks generally distinguish carefully between a genuine, deliberate fraud scheme and an honest customer whose deposits and withdrawals happen to overlap awkwardly in time.
Banks train tellers and back-office staff specifically to recognize patterns associated with kiting, such as frequent, closely timed transfers between a small number of linked accounts, since early detection significantly limits the eventual loss if a kiting scheme is indeed underway.
Modern anti-money-laundering systems, originally built to catch unrelated types of financial crime, have proven incidentally effective at flagging the same rapid, circular transaction patterns that characterize check kiting, adding another layer of detection beyond rules designed specifically for kiting itself.
A bank suspecting kiting activity will generally place an immediate hold on the accounts involved while it investigates further.
A fraud investigation into suspected kiting typically examines the full transaction history across every account believed to be involved in the scheme.