Japanese regulator slams Citi AML systems

Japanese regulator slams Citi AML systems

Japan's financial regulator has ordered Citi to stop sales operations at its retail division for a month after the banking giant failed to improve poor anti-money laundering systems.

The Financial Services Agency says there are "fundamental problems" with Citi's compliance and governance system, which is inadequate for monitoring suspicious transactions.

The FSA has publicly upbraided Citi in the belief that the US bank failed to catch and report money-laundering by a Japanese yakuza criminal syndicate.

The watchdog says Citi has not sufficiently carried out a business improvement order it was given in 2004, when it was told to shut down its private banking arm for similar failings.

The FSA says "control systems necessary for the detection, monitoring, and follow-up of suspicious transactions have not been developed" and that "despite the fact that it mainly relies on screening based on the database, input data is extremely limited; in addition, the database has not been updated since 2004".

The regulator also slammed Citi's management in the country, accusing it of a "lack an understanding of the rules applied in Japan".

Despite establishing an internal audit department, the bank has not accurately identified a series of problems.

The bank has now been told to submit business improvement plans by 31 July which should be executed immediately, with a progress update provided on every three months.

In a statement, the bank says: "Citibank Japan takes this administrative action very seriously and would like to express our sincere apology to our customers and other parties concerned. Citibank Japan is committed to implement all necessary measures to prevent any future occurrence of the problems identified."

Citibank Japan operates in 35 locations and two Internet-only branches throughout the country.

The FSA rap comes just days after it emerged Citi has suspended loan applications at its correspondent division in the US after a review found some property appraisals and income-verification documents were missing.

Comments: (1)

Stanley Epstein
Stanley Epstein - Citadel Advantage Ltd - Modiin 27 June, 2009, 09:37Be the first to give this comment the thumbs up 0 likes

Now, why am I not surprised about this? Given the previous problem, what has the bank's management been doing these past several years?

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