(Image source from: News24online.com)
Citigroup Inc. nearly transferred approximately $6 billion to a client’s account by mistake when an employee mistakenly copied the account number into the area designated for the amount. This incident within Citigroup’s wealth-management sector increased the intended sum by over a thousandfold and was discovered on the following business day, as reported by sources familiar with the situation. This error occurred in April, coinciding with an unrelated incident where another division of the bank mistakenly credited $81 trillion to another client. The mistake made by the wealth division was communicated to regulators and notably caused visible exasperation from Andy Sieg, who had recently taken charge of the unit, according to sources who requested anonymity due to the sensitivity of the matter.
While executives were engaged in conversations with upper management and regulators about how to handle the situation, news of the significantly larger error came to their attention, providing some managers with a mix of relief and concern. As a response, the company has established a tool applicable across the organization to review large, unusual payments and transfers, as mentioned by various sources. In a formal statement, Citigroup indicated that it “quickly recognized and rectified this data entry mistake, which did not affect the bank or our clients. Moreover, we have implemented improved preventative procedures in line with Citi’s ongoing initiatives to minimize manual processes and enhance automation of controls.”
These events underscore Citigroup's persistent difficulties in enhancing risk management and controls following regulatory fines and limitations due to inadequacies in its systems. In January, Chief Executive Officer Jane Fraser reduced a significant profitability goal, partially because the bank must allocate more resources to its “transformation,” a strategy intended to revamp operations and address the concerns of regulators. For anxious wealth management executives, the incident evoked recollections of Citigroup's infamous Revlon Inc. mishap in 2020, where the bank erroneously sent over $900 million to the creditors of the cosmetics firm, according to sources. The funds were retrieved more than two years later after a protracted legal dispute. However, in this specific case, similar to the $81 trillion credit first reported by the Financial Times last week, the error involved an attempted fund transfer between internal accounts, which mitigated the risk for the bank. In the larger case, the error was identified approximately 90 minutes later, as reported by the FT, and was so substantial—exceeding the company’s total assets—that the funds could not have been processed. The procedure at the heart of this incident has since been fully automated, as confirmed by another knowledgeable source.
