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#69387 - 03/26/03 09:28 PM
Re: What Is Customer Doing?
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Platinum Poster
Joined: Jan 2003
Posts: 580
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Quote:
I guess I beg to differ with the statement that kiting doesn't involve cash. If they are cashing checks all over town and bringing the cash to the bank for deposit before the checks hit the account - sounds like a kiting scenerio to me. Even local items will afford a one day delay. I've seen kites involving taking cash out of ATMs after the ATM cut-off in the afternoon and bringing the cash into the branch for deposit. I wouldn't be so quick on the trigger.
That's not aligned with my experience, so I'm not taking my hand off the trigger. It's pretty strange to think that someone would withdraw ATM cash and deposit it the next day to create some sort of kiting scenario. Perhaps I was thinking - big time kiting - not someone an NSF scenario.
Also, why so judgmental today?
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#69391 - 03/26/03 10:09 PM
Re: What Is Customer Doing?
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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It's interesting when your ATM cutover is later than your branch cut off! Ours are 6 p.m. and 3 p.m., respectively. Can't cover your OD from our ATMs!
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John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8
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#69393 - 03/26/03 11:12 PM
Re: What Is Customer Doing?
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Platinum Poster
Joined: Nov 2002
Posts: 624
Texas
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I would estimate that I have seen more cash kites in my experience than check kiting. A lot of people don't even realize that cashing a check and then depositing the cash so they can make it to payday is a kite! And as for the SAR, unless the cash kite exceeds the reporting threshold, it would not be reported. Most cash kites are in smaller amounts. Bank employees are sometimes among the worst in this with the pressure of a low tolerance nsf policy. Those situations do require the filing of an SAR, but would be up to the bank whether to terminate the employee or not, and locals would probably do nothing with it.
As far as the original posters situation, my first thoughts were like Lucy's..money laundering of some sort. I would look for common ownership of the restaurants as said to make sure they were not possibly being used as fronts. I believe the OCC's list of "high risk" businesses does include restaurants or fast food chains.
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An error is not a mistake until you refuse to correct it
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#69394 - 03/27/03 02:14 PM
Re: What Is Customer Doing?
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Platinum Poster
Joined: Jan 2003
Posts: 921
Down South, USA
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How about this scenario:
She is running her own payday loan business. She takes cash repayment from borrowers, she pays off her customers' own loans from regular payday loan companies to take the loans onto her own books, and she pays off loans from employers and/or covers "shortages" before the restaurants notice that their staff have been "borrowing" the takings.
This is potentially highly profitable, hence the $45K-$50K account balance, and would explain the cheques being written. 
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This is my opinion; it is not legal advice, nor the view of my employer, and it may change tomorrow.
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#69396 - 03/27/03 02:41 PM
Re: What Is Customer Doing?
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Power Poster
Joined: Jul 2002
Posts: 6,726
the sandy shore
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Any possibility that there is a tie-in to organized crime here? A lot of time, restaurants are used to launder money for such groups. If this could be true, RICO may come into play.
I am finding this whole scenario fascinating and hope we hear eventually what is really going on.
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I disbelieved what he was saying so hard, I probably created an alternate universe where it wasn't true.
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#69397 - 03/27/03 04:58 PM
Re: What Is Customer Doing?
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Anonymous
Unregistered
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Original poster here!!! I am so thankful to read all the ideas set forth. When you look at the customer's statement, you would instantly believe a kiting scheme - money in almost equals money out. The balance in the account has grown as the number of deposits and checks hitting the account has grown. The restaurants, bars and gas stations with food that are being visited are not owned by the same persons. The person in question writes a check to them and runs back to the bank to deposit the cash - about 2 to 4 times a day. I would have writer's cramp if I tried to keep up with them - 345 checks a month equals about 10+ checks a day. I'm still going to try to convince management to close the account, but we are a small community and don't want bad PR. (My argument will be that we could look a lot worse, if my suspicions are right) My gut instinct is telling me that whatever this person is doing is not entirely legal but I don't make the decisions to close or not. Thanks for the comments and I will post again if I find out anything else.
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#69399 - 03/27/03 05:07 PM
Re: What Is Customer Doing?
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10K Club
Joined: Oct 2000
Posts: 27,754
On the Net
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Thank you for the update. The speculation scenarios were growing and growing.
You may want to look at some of the SAR reviews and see if there are any scenarios even close to yours. If you find any, that is helpful when you approach management. At the very least I would ask for an explanation from the customer. While unlikely, you might get a good one and be happy with the account.
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AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell
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#69400 - 03/27/03 05:36 PM
Re: What Is Customer Doing?
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Power Poster
Joined: Nov 2001
Posts: 6,719
PA
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Quote:
The balance in the account has grown as the number of deposits and checks hitting the account has grown.
Often the velocity of the transactions increase as the kite becomes harder for the depositor to control, which increases the likelihood of loss. This appears to be happening to your customer. I would encourage you to find real-life accounts of kiting to share with management, especially those along the line of BJ Ballard's post earlier in this thread.
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#69401 - 03/27/03 05:53 PM
Re: What Is Customer Doing?
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Gold Star
Joined: Apr 2002
Posts: 424
Pacific NW
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So does that mean I won! Seriously, I don't know where the bad PR would come from, the customer? They know very well what is going on. With 2-4 deposits and 10+ checks a day, this customer is so wrapped up in this her anxiety must be off the charts. Armed with what you know, it's time to have the branch manager pull the customer aside and put an end to this. Offer to help reconcile the account down, and if the the checks and deposits are close to a wash, she may not even be as bad off as she thinks she is, and you may be able to help her with working out the difference, make it a PR plus. She might be relieved, and if not, at least you're through.
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#69402 - 03/27/03 05:54 PM
Re: What Is Customer Doing?
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Anonymous
Unregistered
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My experience with a customer (and an occasional employee) that start doing nut case things with their account is that they are normally involved with some type of addiction (drugs, alcohol, gambling, etc.). Do all the businesses that she write the checks to sell pull tabs???
This must be what it is like at FinCEN when they review SARs....trying to figure out what the heck someone or entity is doing....and why?
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#69404 - 03/27/03 06:08 PM
Re: What Is Customer Doing?
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Diamond Poster
Joined: Mar 2002
Posts: 2,494
MI
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If nothing else, this scenario has raised our knowledge of "what if" situations, and - like a good mystery - it keeps us guessing. Don't forget to fill us in on the final outcome!
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Opinions are mine and never to be taken as legal advice!
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#69405 - 03/27/03 09:26 PM
Re: What Is Customer Doing?
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Platinum Poster
Joined: Jan 2003
Posts: 921
Down South, USA
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I understand a "kite" to be a mechanism by which a customer artificially creates a credit balance in an account using uncleared funds, generally either to disguise an overdraft, or to earn interest income.
In this case we are told that the daily transactions amount to at most a few thousands of dollars a day, whereas the account balance is close to $50k. Notwithstanding the cash and check activity, please can somebody explain how/why the activity as presented in this thread is best explained as a kiting scheme?
Almost by definition a kiting scheme becomes harder to maintain the longer it goes on, and so building up a base credit balance of over $40k seems to me to make this unlikely to be a kiting scheme.
Am I missing something here?
_________________________
This is my opinion; it is not legal advice, nor the view of my employer, and it may change tomorrow.
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#69406 - 03/27/03 09:34 PM
Re: What Is Customer Doing?
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Diamond Poster
Joined: Jan 2003
Posts: 1,454
metsuretsu
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I'm not sure how many laws may be being broken in this situation. What I do know is that something about this customer doesn't seem legit. Why can't they all be honest, law-abiding citizens so that our jobs would be easier. 
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I have many opinions; some are good, some are bad, and some don't contradict.
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#69407 - 03/27/03 09:34 PM
Re: What Is Customer Doing?
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Power Poster
Joined: Nov 2001
Posts: 6,719
PA
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The customer may be carrying an average balance of $40-50 thousand, but that doesn't necessisarily mean that money has been sitting there long. Consider the velocity of the transactions- if the customer has debits of $10,000 per day, and credits of $12,000 per day, then the balance could accumulate to these numbers in only a month. Yet, using FIFO theory, not a cent of that $50,000 is more than a week old. If the deposits stop, and the checks try to clear, it is likely that the checks will be bouncing within a week if this is truly a kite.
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#69409 - 03/28/03 02:38 AM
Re: What Is Customer Doing?
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Platinum Poster
Joined: Jan 2003
Posts: 921
Down South, USA
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Quote:
.... if the customer has debits of $10,000 per day, and credits of $12,000 per day, .....
Except that if you go back to the original post there isn't; we are told that there is "($500 - $2000/time, 2-3 times a day), which works out (using the midpoint of the ranges as averages) at just over $3,000 per day, deposited, and with an unknown amount in checks drawn against it daily, (but certainly it would seem $00's) the balance would take at least weeks to roll up to $45,000.
I realise that something doesn't smell right, but until somebody has asked the customer we are all stabbing in the dark.
_________________________
This is my opinion; it is not legal advice, nor the view of my employer, and it may change tomorrow.
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Who needs this kind of customer? 
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