Citigroup has “insufficient compliance risk management skills” and appears to be struggling to recruit and train the right personnel to address its ongoing regulatory issues, according to an internal assessment made by the bank and leaked in part to Reuters.
The bank has been operating under two consent orders in recent years; one issued by the Federal Reserve Board (FRB) in 2013 and one by the OCC (Office of the Comptroller of the Currency) in 2020. The FRB’s order was related to failures in AML measures and compliance at the bank; and the OCC’s order required Citigroup to address deficiencies in risk management, data governance and internal controls.
This latest development suggests Citigroup is struggling to meet those obligations due to an internal skills shortage. In July, the bank was fined again by the FRB and the OCC for not fulfilling the requirements of the consent orders.
When approached for comment, Citigroup told Reuters that the leaked analysis was carried out as part of the requirements set out in the FRB’s consent order. “We continue to invest heavily in talent and training to ensure we have the right people and expertise in critical areas such as data, risk, controls and compliance,” it said in a statement.
“Intractable problems”
“The bank’s analysis shines a light on why the problems are proving to be intractable,” says the Reuters report. “In one section, for example, the bank said its staff’s technical skills, including on data governance – policies that set out how data is handled – needed to be improved. But then it also noted that when it came to data governance, its training curriculum did not sufficiently address ‘skills identified as needing enhancement.’ It also identified areas such as data analytics and digital literacy as needing improvement. For critical roles in compliance, the bank found it had not spelled out the skills that were needed to succeed. It also said it did not have an adequate assessment of whether employees had the right skills sets for those functions.”
Citigroup has been blighted by compliance failures in recent years, including the much-publicised US$900m Revlon payment, which was transferred in error to the firm’s creditors by Citi in August 2020.
US Senator Elizabeth Warren recently expressed concerns about Citigroup’s regulatory compliance problems. In a letter to Michael Hsu, Acting Comptroller of the Currency in early October, Warren said the bank had become “too big to manage” and it was “time to protect the American financial system by putting growth restrictions on Citi.”
Timeline of some of the notable regulatory compliance issues at Citigroup:
2013 AML failures: Regulators urge Citigroup to improve its monitoring systems for detecting money laundering, especially in cross-border transactions
2014 Banamex fraud: a Mexican subsidiary of Citigroup, Banamex, becomes embroiled in a fraud scandal involving fraudulent loans to an oil services firm, Oceanografía. Citigroup announces US$400m fraud losses.
2015 Forex manipulation: Citigroup pays US$1.3bn to settle Forex manipulation allegations.
2015 Consumer refunds: The bank is ordered to pay up to US$700m in consumer refunds due to deceptive marketing, billing and collection practices in its credit card business.
2018 Interest rate manipulation: Citigroup pays US$100m settlement for interest rate manipulation allegations.
2020 OCC and FRB fine Citigroup US$400m: Citigroup faces a US$400m fine from the Office of the Comptroller of the Currency (OCC) and the Federal Reserve for failing to improve its risk management and internal controls.
2020 Revlon payment error: Citigroup mistakenly wires US$900m to lenders of Revlon Inc. in what is described as one of the biggest financial blunders in recent history.
