Check Kiting

If your underwriting team has ever approved a loan against a bank statement balance that looked solid, only to find out later the account was being cycled between two banks to fake that balance, the review wasn’t careless. It was looking at a single statement in isolation instead of the cross-account pattern check kiting actually requires. That’s the gap most manual bank statement reviews miss.

What Is Check Kiting?

Check kiting is a bank fraud scheme that exploits the float, the processing delay between when a check is deposited and when the funds are actually deducted from the originating account.

Put simply: it is writing checks against money that isn’t there yet, and cycling that trick between two or more accounts before anyone notices.

As Investopedia describes it, fraudsters write bad checks across multiple underfunded accounts, temporarily inflating balances to withdraw cash before the scheme is discovered. (Investopedia, 2026)

Under federal law, check kiting can be prosecuted as bank fraud under 18 U.S.C. §1344, carrying significant fines and prison time. (Cornell Law LII, 2026) For KlearStack’s ICP, the more practical question isn’t the legal definition. It’s whether a submitted bank statement shows the pattern before a loan gets approved against it, the same question document forgery (planned entry) asks about a doctored figure instead of a cycling pattern.

How Check Kiting Is Detected in Bank Statement Review

Reliable detection depends on the same accurate line-by-line reading that intelligent character recognition provides for any extracted financial document.

Step	What it checks	Catches
Balance reconciliation	Recalculates the running balance from every transaction line	Altered or fabricated total balances
Cross-account pattern check	Flags round-trip transfers between the same two accounts within days of each other	Classic kiting cycles
Deposit-size review	Flags single deposits exceeding Fannie Mae’s 50%-of-income threshold	Unexplained large deposits
Metadata check	Confirms the PDF’s creation date matches the statement period	Digitally edited statements

Check Kiting vs. a Fabricated Bank Statement

These produce a similar red flag, an inflated balance, through very different mechanisms. Kiting uses real accounts and real transfers, just timed to exploit the float. A fabricated statement changes the numbers on the document itself, with no underlying transaction behind them.

Type	Mechanism	What catches it
Check kiting	Real transfers timed to exploit clearing delays	Cross-account pattern and balance-history reconciliation
Fabricated statement	Numbers edited directly on the document	Metadata analysis and font/layout inconsistency checks

Both require the same starting point: automated document verification that checks a statement against more than its final stated balance.

Why This Matters for Lending and Compliance Teams

For a lender’s underwriting or compliance team, this isn’t an abstract crime definition. It shows up in four buyer metrics:

• Cost-per-document: manual line-by-line balance reconciliation on every statement doesn’t scale to real loan volume
• Error and exception rate: a kited balance looks completely normal unless someone checks the pattern across dates, not just the final number
• Compliance exposure: approving credit against a kited or fabricated balance is the failure Fannie Mae’s large-deposit rule exists to prevent
• It’s also why bank statement review is built into KlearStack’s BFSI lending workflows as a pattern check, not just a balance lookup

See how KlearStack flags a cycling balance before a loan gets approved against it.

Benchmarks

The fraud risk behind a bank statement isn’t theoretical. An estimated 1 in 116 mortgage applications already contains fraud risk, and income misrepresentation is the single most common finding. (Cotality, 2025)

• Consumer fraud losses: $12.5 billion in 2024, up more than 25% year-over-year (Cotality, 2025)
• Large-deposit review threshold: any single deposit exceeding 50% of monthly qualifying income (Fannie Mae, 2025)

That threshold only works if the underlying named entity recognition (planned entry) correctly identifies which line is a deposit versus a transfer in the first place.

Consumer fraud losses hit $12.5 billion last year. Talk to us about catching your share before it clears.

Common Mistakes and Limitations

Bank statement review misses kiting and related fraud in a few predictable ways.

• Reading the final balance only: the stated balance can look solid even when it was built from a cycling pattern days earlier
• No cross-account view: a single statement in isolation can’t show a round-trip transfer to a second account at a different bank
• Skipping the metadata check: a PDF creation date not matching its statement period is a fast, easy check most manual reviews skip entirely
• Treating every large deposit the same: a deposit just under Fannie Mae’s threshold gets waved through without the same confidence score (planned entry) driven scrutiny as one just over it

Real-World Example

Worked hypothetical, not an audited case study. A lender reviewing a business loan applicant’s bank statements sees a healthy, stable balance across three months.

• Balance-history reconciliation flags two round-trip transfers between the applicant’s two listed accounts, four days apart each time
• The pattern routes to a reviewer instead of proceeding straight to approval, the same human-in-the-loop (planned entry) policy applied throughout underwriting
• The loan is repriced against the applicant’s real average balance instead of the inflated one the kiting cycle was producing

If your underwriting team only checks the final balance on a statement, you already know what a kiting cycle would look like to them. Let’s fix that.

Conclusion

Check kiting is a good textbook definition and a bad way to think about the actual risk in front of a lender. The real question was never whether the scheme has a name. It’s whether a bank statement’s final balance was built from real, stable transactions or from a cycling pattern that only looks stable if nobody checks the dates.

For KlearStack’s buying committee, that distinction is the entire point of automating bank statement review. A person reading one statement sees a number. A system that reconciles balance history, checks metadata, and flags round-trip transfers sees whether that number was ever real. The gap between those two reviews is exactly where kited and fabricated balances currently get approved.

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