In 2017, after Citigroup Inc paid billions of dollars in fines for rigging interest rates, manipulating currency markets and selling shoddy mortgage bonds, the Wall Street giant was still struggling to keep an eye on traders in London.

Officials overseeing Citigroup’s European trading center had hundreds of blind spots, allowing potentially abusive transactions to go undetected in the nearly 900,000 transactions processed daily at the bank’s Canary Wharf headquarters, according to a report by the UK Financial Conduct Authority (FCA). The gaps lasted at least two years, enough time for merchants to generate around £2.6 billion ($3.1 billion) in revenue, according to the report.

Internal compliance teams found their monitoring systems missed almost half of the second most serious category of business risk, the FCA said as it imposed a £12.6 million fine on Citigroup, based in London on Friday. New York. Officials were unable to effectively monitor trading activity for potential insider trading and identity theft until early 2018, the regulator said.

Citigroup CEO Jane Fraser, who oversees one of the world’s biggest investment banks, is under pressure to improve controls after several investigations revealed what regulators said were significant problems.

The Bank of England fined the lender a record £44m in 2019 for years of inaccurate reporting on its capital and liquidity levels, while US regulators fined $400m in 2020 for persistent risk management issues. Hong Kong’s securities regulator fined him HK$348.3 million earlier this year for trading “dishonest” stocks for a decade.

“This fine is indicative of Citigroup’s troubled past and how its failures so often come back to haunt it,” said Kathryn Judge, a law professor specializing in finance at Columbia University in New York. “It helps justify the changes that Fraser is seeking to implement.”

Rekha Jogia-Soni, spokeswoman for Citigroup in London, said the bank was “happy to put this matter behind us”.

Integrity in financial markets depends on a partnership between the FCA and banks using data to detect suspicious transactions, Mark Steward, executive director of enforcement and market surveillance at the regulator, said in a statement. . Citigroup “didn’t throw its weight behind this partnership,” he said.

In January 2018, when Citigroup’s compliance teams rushed to assess the effectiveness of its automatic monitoring systems, they found they had no control over nearly half of what they called risks. Level 2 trading. The oversight gaps occurred in some of the bank’s largest trading activities, including rates and commodities.

The multiple loopholes convinced Citigroup it was not in compliance with EU market abuse laws, which the UK implemented in 2016.

“There does not appear to have been appropriate governance, regulatory change management oversight or appropriate escalation to management regarding this issue,” the bank said in an internal update after the incident. 2018 assessment.

The compliance group’s management team has since changed, the FCA said, and identified oversight gaps were addressed by the end of 2018.

System failure

Fraser, who became CEO in early 2021, is overseeing a year-long campaign to strengthen internal systems and data programs that will end up costing Citigroup billions of dollars. The bank agreed to solve the FCA case, receiving a 30% discount on its fine.

Citigroup is home to a giant trading company that earns billions of dollars every year buying and selling everything from stocks and government bonds to complex derivatives.

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