Cheque fraud or check fraud (American English) refers to a category of criminal acts that involve making the unlawful use of cheques in order to illegally acquire or borrow funds that do not exist within the account balance or account-holder's legal ownership.
Cheque kiting full refers to use of the float to take advantage and delay the notice of non-existent funds.
While some cheque kiters fully intend to bring their accounts into good standing, others, often known as paper hangers, have pure fraud in mind, attempting to "take the money and run."
Such crimes are often used by petty criminals to obtain funds through a quick embezzlement, and are frequently conducted using a fictitious or stolen identity in order to hide that of the real offender.
This form of fraud is the basis for the Nigerian cheque scam and other similar schemes; however, in these cases, the victim will be the one accused of committing such crimes, and will be left to prove their innocence.
Sometimes the cheque fraud comes from an employee of the bank itself, as was the case with Suzette A. Brock, who was convicted of theft for writing five corporate cheques to her own birth name from her desk as a loan servicing agent for Banner Bank of Walla Walla, WA.
[7] In most jurisdictions, passing a cheque for an amount of money the writer knows is not in the account at the time of negotiation (or available for overdraft protection) is usually considered a violation of criminal law.
Only when the successful clearance of a cheque is due to a kiting scheme does the bank traditionally take action.
New technology in place today may make most forms of cheque kiting and paper hanging a thing of the past.
Customers who are noted to obtain cash back frequently are also investigated by the corporation to observe patterns.
Some businesses will also use the cheque strictly as an informational device to automatically debit funds from the account, and will return the item to the customer thereafter.
This was the result of a glitch that allowed users to withdraw money before the bank verified that the cheque was legitimate.