Citigroup fined $136mn for compliance failures in further blow to overhaul

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Citigroup will pay $135.6mn to US banking regulators for failing to correct long-standing problems in risk control and data management, the latest black eye for it and chief executive Jane Fraser, whose tenure has been plagued by regulatory issues.

Michael Hsu, acting Comptroller of the Currency, said in a statement on Wednesday that Citi had “long-standing deficiencies” that had not been fully addressed by the bank and its management. He added that Citi needed to “refocus its efforts” and ensure “appropriate resources are allocated for this purpose”.

The Federal Reserve, which is assessing part of the fine, said a 2023 inspection of Citi found that its data control issues remained a risk.

Fraser on Wednesday said in a statement that Citi had made “good progress” but acknowledged, as she had at a recent investor event, that regulatory issues is one of the areas that the bank has not moved quickly enough to resolve during her tenure.

Last month, another US regulator, the Federal Deposit Insurance Corporation, voted to reject Citi’s so-called living will, finding its plan to wind itself down in a theoretical calamity and avoid a government bailout to be “deficient”.

In May, UK regulators fined Citi £62mn for failing to prevent a $1.4bn trading error, which occurred in 2022 and briefly convulsed European stock markets, a year after Fraser became Citi’s top executive.

A number of top executives in charge of data and technology have recently exited the bank, including Mike Whitaker, who was the head of Citi’s technology and operations. Whitaker was replaced in May by Tim Ryan, who had previously been the US head of accounting and consulting firm PwC.

“We’ve intensified our focus and increased our investment in those areas over the last several months,” Fraser said. “We’ve always said that progress wouldn’t be linear, and we have no doubt that we will be successful in getting our firm where it needs to be.”

Citi’s documented data issues go back to 2020, when it mistakenly sent $900mn to creditors of its client Revlon. Within months, Citi was fined $400mn by regulators for having inadequate risk and data controls, which it was ordered to fix. Citi’s then chief executive Mike Corbat announced in September of that year that he was stepping down. Fraser took over in March 2021, and called fixing Citi’s regulatory woes her “top priority”.

Fraser quickly hired Rob Casper, a former top technology executive at rival JPMorgan, to lead Citi’s data transformation effort. He left the bank in May 2023.

His replacement Kathleen Martin, who also came from JPMorgan, recently sued the bank. In the suit, she alleged she was repeatedly instructed to lie to regulators about Citi’s progress on its risk and data mitigation efforts. Martin claims she was fired last autumn for reporting to regulators that Citi had missed a crucial deadline connected to the 2020 fine.

Citi is fighting the suit, and has said Martin was fired for legitimate reasons.

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