Intersection of Banking and Bankruptcy in Check Kiting

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In the world of modern banking, most banks give customers same-day or next-day availability for both local and non-local check deposits. The vast majority of these "provisional" credits are finalized by the ultimate collection of the checks which gave rise to them. The ability to write checks against such provisional credits gives a shrewd bank depositor free use of someone else's money. Viewed most charitably, this would be deemed aggressive cash management. However, it also gives a dishonest customer the opportunity to write checks against non-existent deposits. When done systematically and fraudulently, prosecutors call this criminal check kiting. The potential losses that a bank may suffer from a check kiter can soar, literally from hundreds of thousands to millions of dollars, in short order. A very bad situation indeed.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Martin Ellis, Shumaker Wiliams, P.C. | Attorney Advertising

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