Check Kiting
Check Kiting, Sep 18, 2025
1. Purpose
To outline the standardized procedure for identifying, investigating, and addressing suspected check kiting activities. This ensures compliance with federal regulations and minimizes financial risk to the institution.
2. Scope
This procedure applies to all employees in operations, fraud prevention, customer service, and compliance teams who are responsible for identifying or responding to suspicious account activity related to check kiting.
3. Definition of Check Kiting
Check kiting is a form of fraud involving multiple bank accounts where checks are written and deposited between the accounts to artificially inflate balances. The goal is to access non-existent funds during the float time before checks clear.
4. Warning Signs
Staff should monitor for the following red flags:
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Frequent check deposits between two or more personal or business accounts.
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High-value deposits with immediate withdrawals.
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Abnormal increase in account activity without clear source of funds.
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Multiple returned or NSF (non-sufficient funds) checks.
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Patterns of covering overdrafts with checks from linked or newly opened accounts.
5. Procedure
5.1 Detection
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Automated Monitoring:
Transaction monitoring systems flag potential kiting patterns based on pre-set thresholds. -
Manual Detection:
Staff should report unusual patterns or suspicious transactions directly to the Fraud Investigations Unit.
5.2 Investigation
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Initial Review (Day 1–2):
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Review flagged accounts and transaction history.
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Identify linked accounts and counterparties.
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Pull relevant reports: deposit history, overdrafts, check images.
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Escalation (Day 2–3):
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Escalate confirmed suspicious activity to the Senior Fraud Analyst.
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Place a hold on any uncollected funds in accordance with Regulation CC.
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Account Freezing (If Needed):
If fraud is likely, recommend freezing the account pending further investigation and notify the customer in writing within regulatory timelines.
5.3 Documentation
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Complete a Suspicious Activity Report (SAR) if activity meets reporting thresholds.
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Maintain documentation of all findings, communications, and actions taken in the fraud case management system.
5.4 Legal & Compliance Notification
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Inform the Legal and Compliance departments of confirmed kiting cases.
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If necessary, cooperate with law enforcement investigations.
6. Customer Handling
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Do not accuse the customer directly of check kiting.
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Use neutral language when inquiring about activity (e.g., “We’ve noticed unusual transaction patterns and need to verify some information.”)
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Provide written communication regarding any account restrictions or closures, referencing the appropriate terms in the account agreement.
7. Preventative Measures
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Daily reconciliation of large deposit accounts.
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Enhanced float controls and deposit hold policies.
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Education and awareness training for frontline employees.
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Restrict immediate funds availability on high-risk accounts.
8. Related Policies & References
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Bank Fraud Prevention Policy
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Account Hold & Funds Availability Policy (Reg CC)
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Anti-Money Laundering (AML) Program
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FFIEC Guidelines on Check Fraud
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FinCEN SAR Filing Instructions