A check-kiting scheme is using checking accounts at two or more institutions to systematically exchange checks of similar amounts. The scheme uses the time needed for the checks to clear to create an inflated and uncollected balance. The scheme participants then use the deposited but uncollected funds while the checks drawn against these funds have not yet cleared.
Check kitting schemes are prosecuted as mail and wire fraud and as bank fraud. Charge of misapplication, making a false statement, and unauthorized issuance of a bank obligation may also be used in prosecution of a check-kiting scheme.
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