Kiting (Check Kiting)

Recorded in US banking from the 19th century; the largest case, E.F. Hutton's, ran from July 1980 and ended in a 1985 guilty plea.

Kiting exploits the 'float' between a cheque's deposit and its clearance, and was already a named offence in 19th-century US banking. The most famous case was corporate: brokerage E.F. Hutton pleaded guilty in 1985 to 2,000 counts of mail and wire fraud after a 20-month scheme (from July 1980) in which branches wrote about $10 billion in cheques between accounts to obtain up to $250 million a day in interest-free money. Faster clearing under Check 21 (2004) reduced the float but did not end kiting: 2025-26 cases include a bank executive kiting $2 million from his own institution and a New York bus-company owner kiting about $10 million.

The kiter holds accounts at two or more banks and writes a cheque from account A, which has no funds, to deposit in account B. Before A's cheque bounces, a cheque from B is deposited in A, and so on in a circle, each bank treating the uncollected deposits as available balance. The rolling float functions as an interest-free loan, often used to keep a failing business afloat or to withdraw cash. It ends when a bank holds a deposit, the amounts grow too large, or an alert bank employee spots the pattern of same-amount transfers.

It needs only two accounts and a chequebook, and for a struggling business it is a free loan until it collapses. Faster clearing and bank pattern-detection have cut the float to a day or two, so modern kites are smaller and shorter; banks usually recover by freezing accounts and only refer cases with large losses, so prosecutions are uncommon relative to incidents.

No body publishes an annual total. The largest case remains E.F. Hutton's, which moved about $10 billion in cheques for interest-free use of up to $250 million a day and ended in $8 million restitution (1985); recent cases run from $1 million to about $10 million. Banks absorb the losses and small businesses collapse when the kite falls.