The Federal Reserve Board announced on Wednesday an enforcement action against Citigroup after an assessment found the bank had multiple “longstanding” deficiencies in risk management and internal controls.
Inadequate implementation was found in data quality management and regulatory reporting, compliance risk management, capital planning and liquidity risk management, the Fed announced on Wednesday.
Citigroup has agreed to pay a $400 million penalty for failing to address the faults, government officials said.
The levy of the fine comes just two months after Citigroup bankers sent nearly $1 billion to the wrong people. The incident, which involved a banker mistakenly wiring $900 million to the lenders of cosmetics giant Revlon, was just the latest scandal related to compliance. In addition to errors related to violations of the Fair Housing Act and the Flood Disaster Protection Act over the last two years, federal prosecutors said in 2017 that Citigroup’s Banamex USA unit failed to stop drug smugglers from using the bank to launder money between the U.S. and Mexico.
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To combat the deficiencies, the Federal Reserve requires that Citigroup: have a written plan that describes the actions it will take to execute its oversight of the matters, a gap analysis of its enterprise-wide risk management framework and internal controls systems, a written plan to enhance its compliance risk management program, and a plan to enhance its data quality management program.
In response to the enforcement action, Citigroup released the same day a statement of its disappointment that it had fallen short of its regulators expectations as well as its commitment to addressing the issues.
“Citi has significant remediation projects underway to strengthen our controls, infrastructure and governance. These projects are each multi-year and have received significant investment. However, while we have made progress in each of these areas, we recognize that substantial improvement is still required to meet the standards we have set for ourselves and that our regulators expect of us,” Citigroup said.
The company stated it plans to invest $1 billion in structural changes, with chief administrative officer Karen Peetz spearheading the programs.
“The entire management team is committed to achieving operational excellence and a best-in-class risk and control environment. We appreciate our regulators’ acknowledgments in the orders that we have begun taking action and are committed to addressing these issues,” Citigroup said.
The bank is currently undergoing a major restructuring in its C-Suite. Longtime CEO Michael Corbat is stepping down early next year. He’ll be replaced by Jane Fraser, who is to become the first woman to lead a major U.S. bank. Fraser, who formerly led the company’s mortgage division, will move up from her position as bank president and head of consumer banking.
