[PB316]

Hi guys,

I am stuck on a question, and am wondering if anyone can please help/explain. How is low average balance compared to high level of deposits indicative of check kiting?

Thanks,

-PB

[rknight21]

because as soon as check is deposited another check is drawn on it(clear sign of kititng or some kind of money laundering)….. hmmm let me see if i can be a little clearer. lets say you have a checking account, if you are always deposting (by way of checks) and at the same time writng alot of checks on the account then thats suspicious because a normal thing to do would be to endorse the checks being deposited to who ever you choose…. ok that might not have explained it well… just go rent the movie “catch me if you” and you will see what kiting is

[SusanStudies]

Check kiting is illegal. It is typical that a person would write a check drawn on Bank A and deposit it into Bank B. They would then immediately withdrawl the amount from Bank B. If it takes 5 days for the check to clear Bank A, the individual is receiving the money from Bank B before the check is cleared, thus taking advantage of the float time (5 days). The majority of the time, there are not sufficient funds in Bank A to cover the check so this becomes an ongoing process of borrowing from Peter to pay Paul…it cycles back and forth between banks.

An indicator of this is that there are numerous or large deposits made to Bank B but the average balance is low because the funds are withdrawn so quickly.

I'm not sure kiting is as prevalent as it once once because the electronic processing of checks. When checks were actually mailed between banks before the funds were verified, this was probably easier to accomplish.

AUD: 07/11/11 - Passed
BEC: 08/27/11 - Passed
FAR: 01/17/12 - Passed
REG: 04/30/12; Re-take 7/16/12 - Passed

FINISHED!!!!!!!!

[Author]

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