We have an employee who has been going to Wal Mart and writing checks for small dollar items and then writing an over-amount for cash back. She is doing this sometimes in excess of 20 times a day. She will then bring the cash back to the bank and make a cash deposit.

Is this kiting?

This is certainly a form a kiting. If she is depositing cash to the bank from an item that is not good with out that cash deposit then she is using the banks money to inflate her balance and buy time. If this were my employee, I would want to question him/her right away to get their explanation on the activity. Unless there was some real explanation that made sence, and I can't think of one, this would be grounds for termination here.

If she is an employee - how does she get to go to Wal-Mart 20 times a day?

Fire her.

I agree, she should be fired. I would also do some investigation into any cash handling activities that she is or has been involved in. It has been my experience that it is usually only a matter of time before those that are in need of extra money will give in to the temptation of taking it from the bank.

An ex-girlfriend's roommate used to cover bad checks by making 'empty' deposits using ATM's. Her bank sat her down and had a talk about that. So then what she did was started cashing checks at the grocery store and would deposit the money at the ATM. No, my girlfriend didn't stay living with her.

I don't know to what level it is catching on nationwide, but here locally (Des Moines, IA) 'instant check posting' is becoming commonplace. It certainly would put an end to this type of activity.

What I don't understand about the person in question is why so many times a day? What could possibly be hitting her account that she is unable to prepare for just once in a day?

Definitely needs investigation and probably firing (I am not saying definitely just in case there is some bizarre compulsion situation going on here.) My first thought was the same as Randy, how does she get to Walmart 20 times a day if she is working? Look at all of her work to see if there is any funny business going on. What she is doing is generally done to inflate the balance to cover the checks written.

Make sure that you check your employee handbook - we had this issue, and believe it or not, it wasn't covered. So we counseled the employee and updated our employee handbook - I think we did ask the employee to close their checking account.

Is a SAR required? The amount is less than $5000 but this is an employee.

Is she actually covering checks/withdrawals with the deposits of the $ obtained at Walmart? If yes, then you must file an SAR in my opinion.

And I would suggest that it is best to include a generic ethics clause in any employee contract or handbook, because you'll never think of every possible form of unacceptable, firing-worthy behavior which employees may devise. Bankers, as professional handlers of other people's money, must be above ethical and legal reproach. Kiting is a crime. If you can't fire a banker for committing a financial crime, let alone for using an account at your bank to commit it, well, I don't know who can ever be fired.

Do the checks all clear? Or is this a case where she has so many checks out with Wal-mart that they will never all clear? You guys are cracking the whip pretty hard with this firing thing. If she went in on Wednesday and wrote two checks at Wal-mart and got $20 cash back on each, but didn't deposit it, would you have a problem? NO YOU WOULDN'T. I agree there is a problem here but I think more details are needed to the true extent of the situation.

I agree with Whodunit. I think someone needs to sit down with her and ask her the reason for doing it.

But with it being cash, what is the fraudulent intent, here? She's using available funds for when the check posts to the account so it's not like a check kite (where the true danger lies). I don't get it.

But I wouldn't fire her. Counsel her, ask questions, monitor...but fire?!

This has been going on for about a month with literally 20+ checks each day. How she has time I do not know. The float time is about 4-5 days. If she is not able to do this for a couple days then it craters and we have hot checks out there.

Now I see the problem. So most likely one day this all going to crash and her account is going to go seriously negative. I may have to lean towards those I criticized at this point. Of course, my institution has a hot check policy and she could probably be terminated under that without ever getting into this issue if you have one.

Don't feel bad if it took a minute, Whodunit. This kind of kite (often known as a "cash kite") throws a lot of bankers. We have an assistant VP who often says, "Well, this customer isn't kiting; he's just . . . " and then describes a textbook cash kite.

That's why when I define kiting, I prefer to leave the word "check" out of it. What really matters isn't the exact vehicle. It's that money is moved between two or more places in a pattern that consistently inflates the apparent total of all balances (including cash in the pocket, bank accounts, money orders, etc) above the true total. Normal activity causes the apparent total to fluctuate above and below the true balance, not be consistently high, like what this employee is achieving.

AhHa! The lightbulb flashed on.

Can her. Just kidding. Maybe.

If it's been going on for that long, with that volume, is this the first time it has been noticed? If not, has someone tried to talk to her about this? Depending on her reaction to the talk, or her explanation, it may be grounds to terminate on violation of your ethics policy.

If you had a customer doing this, would you keep the account? More importantly, would you then offer them a job handling money? If the answer is no to both, then firing doesn't seem as extreme an option. How will an examiner react if they find out that an employee has been doing this and was allowed to continue?

Of course, she may then try to empty her account and leave the bank holding the bag for all those floating checks. That's what, 80-100 checks over that time?

The thing is, it is inevitable that the bank ends up holding these checks. Clearly her paycheck is not enough to get her out of the cycle and sustain her so this is a bad spiral. Wal-mart has a $20 cash over policy so if she is doing this 20 times a day that is $400/day that she is "creating", at some point her ability to create money will not be able to stay ahead of the rate she is spending it to make it a down comes baby cradle and all.

What is the impact on your bond coverage due to your knowledge of illegal activity by an employee in a position of trust?

Most bonds include a deductible that would greatly exceed whatever this meager (I trust) loss might become.

I agree with the others that feel this is a kite and you need to get to the bottom of this quickly. Unless this employee can convince you this is not a kite you are required to file a SAR. Refer to the SAR instructions for Insider abuse involving any amount.

True. Failure to prevent this sort of fraud could affect the bank's ability to keep its coverage, or raise its premium.

I also think that if this employee was to later engage in fraudulent activity, the bank's coverage for those acts could be problematic.