Many types of fraud exist that involve the transfer of cash between checking accounts in different banks. A person can write a check using an account from one bank and deposit the check to another account in another bank before the check can bounce or be considered invalid. This type of fraud is referred to as check kiting.
The purpose of check kiting is to falsely increase the balance of one checking account through the use of float. The float is the money supply that is successfully deducted from one checking account and added to another checking account upon the cashing in of a check.
Several forms of check kiting exist, from the most simple to the most complicated. Circular check kiting involves multiple banks in order to take greater advantage of the float. A person will issue a check from bank A to bank B in order to provide funds at bank B. The next day, a person will issue a check from bank B to bank A to cover the funds that were previously withdrawn from bank B. The check issued the first time is referred to as a kite.
Corporate kiting is a large scale check kiting fraud scheme that involves millions of dollars used to earn interest or borrow money. Retail-based check kiting is similar to circular check kiting except that another entity other than a bank is used to transfer funds or hold funds. This third party refers to a retail business, usually a supermarket.