Check fraud

Cheque fraud 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. Most methods involve taking advantage of the float (the time between the negotiation of the cheque and its clearance at the cheque-writer's bank) to draw out these funds. Specific kinds of cheque fraud include cheque kiting, where funds are deposited before the end of the float period to cover the fraud, and paper hanging, where the float offers the opportunity to write fraudulent cheques but the account is never replenished.

Cheque kiting 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."

A cheque is written to a merchant or other recipient, hoping the recipient will not suspect that the cheque will not clear. The buyer will then take possession of the cash, goods, or services purchased with the cheque, and will hope the recipient will not take action or will do so in vain.

The paper hanger deposits a cheque one time that s/he knows is bad or fictitious into his/her account. When the bank considers the funds available (usually on the next business day), but before the bank is informed the cheque is bad, the paper hanger then withdraws the funds in cash. The offender knows the cheque will bounce, and the resulting account will be in debt, but the offender will abandon the account and take the cash.

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 his/her innocence.

Sometimes, forgery is the method of choice in defrauding a bank. One form of forgery involves the use of a victim's legitimate cheques, that have either been altogether stolen and then cashed, or altering a cheque that has been legitimately written to the perpetrator, by adding words and/or digits in order to inflate the amount (raising a cheque).

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Wikipedia