Check Kiting Fraud: What It Is & How to Prevent It [+Tips]

Check kiting is often underestimated and viewed as a low-tech fraud that shouldn't pose a serious threat in a system built on real-time payments and automated controls. Yet one core vulnerability remains: float time.

That brief window between depositing a check and clearing the funds provides fraudsters with an opportunity to exploit the system.

This guide explains how check kiting fraud operates, why it persists, and the practical steps banks can take to detect and prevent it.

What is check kiting?

Check kiting is a form of check fraud that exploits the "float" – the time it takes a deposit to clear. During that window, fraudsters tap into funds that don't actually exist, temporarily inflating an account balance so that checks clear when they otherwise would bounce.

Example: In 2025, a man from Connecticut used nearly 200 bank accounts to deposit bad checks and quickly withdraw funds before they cleared, defrauding banks of $350,000. Authorities charged him and six co-conspirators with multiple felonies.

How Check Kiting Works

Here's a step-by-step example of a classic kiting cycle:

1. Write a bad check: The fraudster writes Check #1 for $10,000 from Account A (which only has, say, $100). They deposit it in Account B at a different bank.
2. Deposit and withdraw: Bank B credits Account B with $10,000 (subject to regular clearing). The kiter then immediately withdraws $9,900 in cash or issues other payments from Account B before Check #1 clears.
3. The original check bounces: A few days later, Bank B contacts Bank A for the funds. Bank A finds insufficient funds in Account A and returns Check #1 NSF (non-sufficient funds). Now, Account A has an overdraft of $9,900.
4. Cover the overdraft: To avoid detection, the kiter covers the shortfall in Account A by depositing another bad check (Check #2 for $9,900) from Account B (or even a third account, C). The cycle repeats: deposit Check #2 into A, quickly withdraw its credit from A, etc.
5. Looping the float: The fraudster may write a chain of checks among A, B, C (and additional accounts), each covering the previous shortfall. Meanwhile, funds are constantly being withdrawn or transferred for personal use.

Types of check kiting schemes

Check kiting takes many forms, each exploiting different systems:

• Circular Kiting: Fraudsters move bad checks in a loop across multiple accounts (often at different banks), withdrawing funds before checks bounce.
• Retail Kiting: Criminals write bad checks at stores or check-cashing locations, then quickly spend or withdraw funds before the check is returned as NSF.
• ATM Kiting: Using ATMs, kiters deposit bad checks and instantly withdraw funds, often at odd hours or remote locations. A 2023 DOJ case exposed this tactic used in Las Vegas casinos.
• Corporate Kiting: Businesses float funds between internal accounts to create fake balances. In one Kansas case, livestock dealers used this method to secure loans and cover expenses for years.

What makes check kiting hard to catch?

It's easy to assume that real-time banking would put a stop to check kiting cold.

Here's why this form of fraud remains effective:

Float time still exists

Regulation CC requires banks to make deposited funds available quickly, often by the next business day. However, actual settlement from the paying bank can take longer.

That delay (even a day or two) is the window kiting needs.

Instant access, delayed consequences

Many banks allow immediate access to deposited checks via mobile apps, branch scanning, or remote systems.

Meanwhile, returned checks (due to insufficient funds or fraud) can take several days to process. Fraudsters take advantage of that time gap to drain accounts before anyone notices.

Remote and mobile deposits increase risk

With remote deposit capture and mobile apps, fraudsters can deposit checks from anywhere – no teller or branch interaction required.

Some criminals even deposit the same check multiple times using different channels. The original paper check often disappears, reducing the chance of tracing it.

Blended schemes across channels

Today's kiting schemes often involve more than just checks.

Fraudsters use ACH transfers, wire payments, prepaid cards, and even peer-to-peer apps to move funds and complicate tracking quickly.

While consumers may rely less on checks, many businesses still use them, leaving the door open for future use.

Lack of shared oversight between banks

Most banks only monitor account behavior within their institution.

If a fraudster moves money across three or four banks, no single bank sees the whole picture.

Without a consortium-level view or coordinated reporting (like SARs), check kiting can continue unchecked until the system finally catches up.

Fraud patterns disguised as legitimate activity

Skilled criminals don't make reckless overdrafts.

They keep account balances slightly positive, use realistic-looking amounts, and mimic payroll or vendor payments to avoid suspicion.

These behaviors blend in with typical business activity, making it hard for traditional rule-based systems to detect a problem until it's too late.

Prevention strategies against check kiting for financial institutions

To prevent check kiting, banks must blend policy, technology, and vigilance. Here are key strategies:

1. Strengthen your hold policies

Don't treat all check deposits the same. Set hold durations based on account history, customer risk level, and deposit behavior.

For example, apply longer holds on large checks, third-party deposits, or new accounts with little transaction history.

What to do:

• Apply extended or exception holds for new or high-risk accounts.
• Hold checks over $5,000 longer than the Reg CC minimum when suspicious patterns appear.
• Monitor accounts with frequent interbank transfers for early warning signs.

Tip:

VALID's InteliFUNDS utilizes real-time scoring to assess every check deposit, considering behavioral signals, check metadata, and account risk. It approves over 99% of deposits instantly while applying automated holds to the highest-risk 1% based on intelligent decisions.

2. Set tiered limits and velocity controls

Implement limits on automated withdrawals or transfers that account for recent transactions, such as deposits and withdrawals, to prevent excessive use.

For instance, a system might block a withdrawal from check-deposited funds on the same day. Or it could cap the total daily cash withdrawal or transfer amount.

Steps to implement:

• Block same-day withdrawals or transfers from new check deposits.
• Set tiered daily cash and transfer caps based on account age, activity, and deposit source.
• Use velocity checks to flag abnormal deposit spikes (e.g., receiving 5+ checks in 24 hours).

Tip:

VALID's InstantFUNDS adapts withdrawal and transfers access based on real-time behavioral risk. It considers deposit timing, account profile, and transaction history to apply dynamic limits.

3. Monitor in real time using behavioral patterns

Kiting doesn't always trigger immediate red flags. The fraud often unfolds as a sequence of seemingly routine actions.

Behavioral analytics helps identify those patterns early.

How to improve detection:

• Use continuous monitoring to track multi-step transaction flows.
• Identify behavioral loops like deposit →, large withdrawal →, second deposit.
• Combine account behavior with timing and channel data to dynamically score risk.

Tip:

VALID's Real-Time Loss Alerts (RTLA) detect behavioral loops and timing anomalies across deposits and withdrawals. When it identifies a suspicious sequence, such as rapid deposits followed by immediate withdrawals, it alerts teams before the scheme causes a loss, allowing for timely intervention even mid-cycle.

4. Profile expected customer behavior

Every account has a rhythm. When an account starts behaving in ways that don't fit its history, it's often a sign of manipulation.

Profiling expected behavior makes it easier to spot outliers and intervene early.

Best practices:

• Build profiles based on deposit frequency, transaction size, and funding sources.
• Alert compliance when a low-volume account suddenly processes large check deposits from multiple sources.
• For commercial accounts, match deposit behavior to business type and seasonal trends.

5. Correlate data across all payment channels

Monitor ACH and wire flows for related activity. Kiting schemes sometimes use non-check payments to transfer money.

A unified dashboard that correlates checks, ACH, wire, and ATM transactions helps catch such tactics.

How to connect the dots:

• Consolidate data from checks, ACH, wires, and ATMs into a unified fraud dashboard.
• Watch for patterns, such as check deposits followed by same-day wire transfers or ATM withdrawals.
• Prioritize alerts when fraudsters move funds through multiple payment channels in quick succession.

6. Share risk intelligence across institutions

Fraud rarely stays in one place.

Many kiting schemes span multiple banks, especially when fraudsters open dozens of accounts. Without shared insight, banks are flying blind.

To make it work:

• Join fraud-sharing consortiums to both contribute and receive alerts.
• Integrate external risk signals into your fraud scoring models.
• Match inbound checks or wires against known high-risk accounts or flagged identities.

7. Train staff and report early

Train tellers and fraud analysts to recognize kiting red flags.

From tellers to fraud analysts, your team is a key line of defense. When staff know what to look for and how to escalate, response times improve dramatically.

Training focus areas:

• Teach staff to recognize red flags, such as back-to-back deposits, urgent cash requests, and inconsistent identification.
• Encourage prompt SAR filings, even if the dollar amounts seem small.
• Establish clear reporting workflows to identify and address unusual behavior across all channels.

8. Verify customers at key risk points

For high-risk accounts, verify identification when processing high-dollar check cash-outs.

If a customer writes multiple checks from another bank and attempts to cash them, a teller or system may require identification.

What to do:

• Require ID for high-dollar cash-outs tied to external checks.
• Use verification prompts based on system flags (e.g., a large deposit followed by a withdrawal request).
• For mobile channels, layer in the device and behavior-based risk scoring.

9. Modernize outdated fraud systems

Traditional check fraud controls can't keep up with today's fraud pace.

Kiting schemes move quickly and frequently change tactics.

Real-time systems that learn and adapt are now essential for effective defense.

Upgrade recommendations:

• Replace batch-based or static rule logic with continuous scoring models.
• Integrate fraud detection into every touchpoint – mobile, teller, ATM, and back office.
• Use real-time signals to act before funds move, not after.

How VALID Systems help financial institutions to prevent check kiting fraud

For institutions under pressure to deliver faster funds availability while managing fraud exposure, VALID Systems offers a purpose-built, real-time solution that stops check kiting fraud before losses occur.

Here's how VALID shuts it down:

Real-Time Risk Scoring at the Point of Deposit

VALID's InteliFUNDS and InstantFUNDS score every check at the moment of deposit – across teller, ATM, mobile, and RDC channels. They instantly clear low-risk items and hold or escalate high-risk ones, shutting down the float window that kiting schemes rely on.

Adaptive Behavioral Analytics

VALID uses behavioral analytics and machine learning to learn standard transaction patterns across accounts continuously and then flag deviations like rapid deposit cycles, inconsistent check origins, or interlinked accounts.

High-Precision Alerts

With Real-Time Loss Alerts (RTLA), VALID surfaces actionable threats at the moment of risk, not hours or days later. In testing, it identified 75 %+ of likely kiting cases at deposit time, drastically reducing loss exposure and response delays.

Consortium-Based Intelligence

VALID's platform benefits from shared fraud intelligence across its banking partners. This network effect helps institutions detect coordinated kiting rings that would otherwise evade siloed detection.

In short, VALID strengthens your fraud protection by:

• Empowering your institution to enforce smarter holds at the moment of risk
• Instantly clearing 99% of safe deposits and flagging the 1% that matter
• Providing complete visibility across check, wire, ACH, and ATM activity
• Helping your fraud team focus with fewer distractions and higher-quality alerts
• Connecting your bank to a broader intelligence network that stops fraud rings early

Ready to explore proactive check fraud defense tailored to your bank?

Schedule a free consultation with VALID Systems and prevent check kiting in real time, not after the loss.