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Citigroup won 81TN on clients’ accounts if they were intended to send only $280. This is an error that could hinder the bank’s attempts to persuade regulators that it has fixed a long-term operational issue.
The previously unreported erroneous internal transfer that occurred last April and was overlooked by both the second official assigned to check the transaction before it was approved to be processed at the start of the business the following day.
A third employee detected an issue with bank account balance and caught the payment 90 minutes after it was posted. Payments were overturned hours later, according to an internal account of the event seen by the Financial Times and those seen by the two who are familiar with the event.
Others with knowledge of the matter said the funds disclosed “close mistakes” to the Federal Reserve and Currency offices.
The bank said “Detective Control quickly identified input errors between two Citi ledger accounts and reversed the entries,” and that these mechanisms “stop funds leaving the bank.”
“While it had no impact on the banks or clients, this episode highlights the ongoing efforts to eliminate manual processes and automate control.”
According to an internal report seen by the FT, a total of 10 near misses – if the bank handles the wrong amount but can ultimately recover the funds, it has resulted in a large portion of over $1 billion last year. The figures fell slightly from 13 the previous year. City declined to comment on the wider event.
No nearer mistakes need to be reported to regulators. This means there is no comprehensive public data on how often these incidents occur across sectors. Several former regulators and bank risk managers said near misses above $1 billion are rare across the US banking industry.
A series of near misses in the City highlights Wall Street Bank struggles to fix operational issues almost five years later after mistakenly sending $900 million to creditors who engaged in a controversial battle over cosmetics group LeBron’s debt.
City’s false payments to LeBron led to the expulsion of then-Chief Executive Michael Corbat, a major fine, and the imposition of a regulatory consent order requiring the issue to be fixed.
Jane Fraser, who took over as City’s top executive at Corbat in 2021, explains that she has corrected City’s regulatory issues as her “first priority.” Still, the group was fined $136 million last year by the OCC and the Federal Reserve for not fixing risk and data management issues.
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According to anyone familiar with the incident, City’s April mistake near 81tn was due to a backup system with input errors and an cumbersome user interface. In mid-March, four transactions totaling $280 towards Brazilian customers’ escrow accounts were blocked by screens catching payments, a potential sanctions violation.
The payment was cleared quickly, but still remained stuck in the bank’s system and was unable to complete it successfully.
Citi’s technology team has instructed employees who processed the payment to manually enter transactions into a rarely used backup screen. One quirk of this program was that the amount field was pre-filled with 15 zeros.
