KITING - Tax Ninja's Word of the Week

Kiting is the fraudulent use of a financial instrument to obtain additional credit that is not authorized. It is used in banking to refer to the practice of depositing and drawing checks at two or more banks and taking advantage of the time it takes for the second bank to collect funds from the first bank.

Also refers to illegally increasing the face value of a check by changing the numbers on the check. In the context of securities, refers to the manipulation and inflation of stock prices.

Kiting encompasses two main types of fraud:

• Issuing or altering a check or bank draft for which there are insufficient funds.
• Misrepresenting the value of a financial instrument for the purpose of extending credit obligations or increasing financial leverage.

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