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Check Kiting

by dr. damn


NOTICE: TO ALL CONCERNED Certain text files and messages contained on this site deal with activities and devices which would be in violation of various Federal, State, and local laws if actually carried out or constructed. The webmasters of this site do not advocate the breaking of any law. Our text files and message bases are for informational purposes only. We recommend that you contact your local law enforcement officials before undertaking any project based upon any information obtained from this or any other web site. We do not guarantee that any of the information contained on this system is correct, workable, or factual. We are not responsible for, nor do we assume any liability for, damages resulting from the use of any information on this site.

Before you start reading, I would like to issue a warning: this is a bad idea. A terrible idea. If you follow the procedures I explain in this file, I can almost guarantee that you will end up in jail. Thank you.

A check is not like other forms of money. When you take a few dollars to a bank to deposit it in your account, the cash is taken from you right away and your account is adjusted accordingly. When cash is withdrawn, it is removed from your account and you are handed the bills immediately. Checks are not like this.

When you cash a check, the amount of the check is deposited in your account immediately. However, just because the check has been cashed does not mean that it has been “cleared.” What this means to you is that you have been given a short-term loan by the bank until they receive money from the financial institution that issued the check in the first place.

A clever observer would notice something fishy about this. You see, there is a period of time in which the bank that cashed the check does not have the money, and when the bank that issued the check is unaware that the check was issued. This is where check kiting comes in.

Let me give you an example as to how a check kiting scheme works. Bob takes out two checking accounts, one at Wank of America and the other at Bells Fargo. He deposits the minimum in the account to open it, say, $10 for each account. Now Bob writes a check for $10 against his Wank of America account. He cashes it into his Bells Fargo account.

“Wait!” says a clever, but uniformed observer. “If he cashes a check for $10, they will close his Wank of America account!”

No, that is incorrect, because before the guys at Wank of American even know that he wrote a check, he has deposited a $20 check from his Bells Fargo account into the Wank of American account.

The next step, of course, is to cash a check for a non-existent $30 that he wrote against his Wank of America account into his Bells Fargo account. And so on.

This generates as much non-existent – and illegal – revenue as one can imagine. Neither bank really knows what’s going on for a while.

I would never recommend that anyone actually do this, no matter how short on cash they are. The banks will catch on (they always do), and they will prosecute.

 
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