Check kiting was once associated with paper checks. Now, in the digital age, it can look different. However, it is still illegal and can result in steep criminal penalties in New York and nationwide.
Check kiting exploits the float time between banks to inflate account balances artificially. If a criminal court finds you guilty of check kiting, you could expect to pay thousands of dollars in fines and spend years behind bars.
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Digital check kiting in the modern world
People today can transfer money between accounts with ease and convenience. That also means check kiting can be easier than ever, but the penalties are still the same. Here are a few examples of what check kiting can look like today:
Transferring funds between mobile banking apps
Mobile banking apps have made financial transactions more convenient and susceptible to misuse. With instant deposits and transfers, some individuals manipulate these features to create a false sense of liquidity.
An example would be someone using a mobile banking app to deposit a check into their account, knowing they don’t have enough funds. They then quickly transfer or spend the money before the bank realizes the check will bounce.
Committing fraud through the automated clearing house network
The ACH network, used for electronic payments and money transfers, is another way people engage in check kiting. They exploit the lag time before the funds clear by initiating ACH transfers between accounts.
An example of this would be someone who has two accounts at different banks. They initiate a transfer from Bank A to Bank B, knowing there are insufficient funds in Bank A. During processing, they take advantage of the temporary credit to access funds that aren’t there.
Using cryptocurrency and digital wallets
The world of cryptocurrency isn’t even immune to check kiting. Some individuals transfer cryptocurrencies between digital wallets and traditional bank accounts.
An example would be someone transferring cryptocurrency from a digital wallet to a bank account, knowing the cryptocurrency transaction is still pending. They then quickly use the temporarily inflated bank balance to make purchases or transfers before an institution fully processes the transfer.
Accused of check kiting? Understand your rights.
Check kiting, whether through a paper check or digital medium, is illegal and can come with serious criminal penalties. If you face criminal accusations of check kiting, seeking help from an experienced and aggressive white collar criminal defense attorney is important.
They can help you understand your rights and build a compelling case at the state or federal level.
