Two software companies have formed an alliance to market complementary systems to help detect and prevent check kiting.
The alliance between Computrol of St. Louis and Sterling Software of Dallas is aimed at helping banks tackle checking-account fraud, which has reportedly been on the rise.
While industrywide figures are not available, experts estimate that $750 million to $1.5 billion is lost each year because of the scams.
To fight check fraud, Computrol for a number of years has been marketing its Kiting Detection System (KDS) software, which analyzes the volume and velocity of funds flowing through accounts over a period of time.
Monitoring the Float
Kiting occurs when an individual defrauds a bank by manipulating the float of deposited checks. The Computrol software enables bankers to establish up to 14 account parameters to detect the possibility of a kite.
The parameters are based on variations in account activity patterns, such as geographic location, type of account, internal processing schedules, and branch system organization.
In addition, banks can control which accounts to analyze by type of recent activity and whether there has been sufficient activity to analyze.
With the Sterling Software alliance, the detection capabilities of KDS will be further improved. Sterling's product, Vector 9, automates the process of research and account transaction analysis. Once accounts are identified as possible problems, the Vector 9 system collects historical and current research data from the demand deposit account system, the customer information files, and other sources.
By researching all related accounts within the main bank or at any other bank being processed by the main bank, Vector 9 speeds up the investigation process.
KDS is installed at a number of banks around the country, including SouthTrust Bank in Birmingham, Ala., and First Federal Savings and Loan Association of Rochester, N.Y. First Florida Bank in Tampa, for example, has been using KDS to monitor account activity since 1985.
Savings at First Florida
George Webster, vice president of loss control and fraud investigation at First Florida, estimates that KDS has saved the bank $8 million to $11 million over seven years. He indicated that the bank identifies 30 to 35 check-kiting suspects month.
"We've always been the first to detect a scheme and then the first to return a check, which protects the bank," Mr. Webster said.
Under their agreement, Computrol and Sterling will cooperate in the sale and marketing of the two products. In addition, Computrol will support an interface between the KDS and Vector 9 software, both of which run on IBM mainframe computers.
Ms. Sullivan is a freelance writer based in New York.