Check kitting is a form of wire fraud that usually involves one or more persons using checking accounts at two or more banks at the same time to exchange checks of similar accounts. The purpose of check kiting is to make use of the delay or lag time as the checks are cleared through the Federal Reserve System.
In this situation an inflated and fraudulent balance is created within the banks, causing them to lose money. Sometimes the check drawn against uncollected funds are in the clearing process, and the conspirators in the scheme would spend all of the deposited and uncollected funds (a float scheme).
Check kitting schemes are illegal and are investigated by federal and state law enforcement, because the potential amount of funds that go uncollected and/or float can be astronomical depending the number of co-conspirators on hand and the length of time they used to sifted away the funds.
How is the fraudulent act detected?
Where there is a beginning there is an end. And this goes without saying; there is an end to the check-kiting scheme as well. The end begins with the bank’s own investigation, which is less restricted by the boundaries of reasonable cause.
Fraudulent checks within a check kiting scheme are often circulated within a handful of accounts, so if more than one check in sequence was issued to the same vendor on multiple occasions, then the vendor’s account may be investigated by the bank’s investigation team on allegations of fraud. Once the bank’s fraud investigator gathered the primary evidence of check kiting, they can turn the case over to the Federal Bureau of Investigation (FBI), the IRS Criminal Investigation Division, or to the US Attorney’s Office.
If you are currently being investigated or charged by the FBI or IRS on allegations of wire fraud in New York, call our office at (212) 577-6677 to get professional legal advice.