By Emily Flitter Published Oct. 7, 2020 Updated Feb. 10, 2021 Two months after one of its bankers accidentally sent nearly $1 billion to the wrong people, Citigroup And when Mary T. Barra was put in charge of General Motors, becoming the first woman to lead one of the major U.S. automakers, she was tasked with righting its course four years after it had declared bankruptcy. Did a fireplace, a fishtank, and a friendship with a business journalist really end Todd S. Thomson's tenure as head of global wealth management at Citigroup? To help companies hire, Carlyle will tap its own database of executives along with partners like Catalyst and the Latino Corporate Directors Association. Citi was serving as the so-called administrative agent between Revlon, the embattled cosmetics company, and its creditors. It appears that no mistake of the size or nature of Citibanks had ever happened before . I certainly have a different style, but I dont think its necessarily so much gender-related.. Carlyle has arranged more than $6 billion in E.S.G.-linked financing, including loans for the packaging firm Logoplaste tied to reduction in its emissions, the denim manufacturer Jeanologia linked to water savings and the gearbox maker Flender based on renewable power capacity. To recap: On Jan. 22, Citigroup announced that Thomson, 45, and a onetime rival of Chief Executive Prince, was out. It Will Be a Tough Job. Bartiromo has never spoken publicly about the issue. It will be run by a new affiliate of the firm, Ariel Alternatives, and led by Leslie Brun, an Ariel board member and founder of the investment firm Hamilton Lane. When asked how much money it makes from Citadel Securities, Robinhood referred to its public disclosures of payment for order flow contracts. Workers from junior salespeople to senior executives have been ensnared in monthslong reviews stemming from an anonymous complaint portal for employees, according to sources. How they work: Beware of calls, letters and emails from fake IRS agents about bogus tax bills. Citi's errant transmission of $900 million in August to creditors of cosmetics firm Revlon likely served as a reminder to regulators that long-standing risk management issues had yet to be fully resolved. The incoming C.E.O. To win, the bank needs to break a cycle of underinvestment that leads to subpar returns. "Citi missed its chance to be big in the U.S. retail market," the former leader said. Here are the key elements so far. Citi How is David Cameron involved? But it lost out to Wells Fargo, which offered to buy all of Wachovia for a far larger price. cited the banks violations of the Fair Housing Act in 2019 and the Flood Disaster Protection Act earlier this year, and attributed both to Citis inadequate risk management procedures. New York sues Amazon over worker pandemic protections. Its one thing to mistakenly send money to someone with no entitlement to that payment, he told DealBook. Navigating the compliance landscape in banking, Innovative marketing strategies in banking. Some of the descriptions of Thomson's spending were provided anonymously by people in the upper ranks of Citi's management. Bitcoin reaches $50,000 for the first time. Citibank cant get back $500 million it wired by mistake, judge They also referred to a relationship between Thomson and CNBC anchor and BusinessWeek columnist Maria Bartiromo that seemed to go beyond the merely professional, citing a trip the two took from China to the U.S. aboard a company jet. The structural toll for Citi, however, may be substantial. Citigroup is fined $400 million over longstanding internal problems. It also looked at what this could be worth if businesses meet their pledges to spend more with these suppliers, typically 10 to 15 percent, as part of corporate Americas racial reckoning. But there is nothing unfair about keeping that money when its owed.. Akufo-Addo demands retraction, apology from Al Jazeera over All have downsides. Listen to this article. The burning question on the Street is whether the alleged scandal was intentionally leaked to divert attention away from performance problems at Citi. (WSJ), Chinese officials reportedly blocked the I.P.O. In Citibanks case, Revlon actually owed money to the recipients who received the wrong transfer. Include your name and location, and we may feature your response in a future newsletter. Access your favorite topics in a personalized feed while you're on the go. Regulators also found that the bank had, for at least six years, failed to follow a federal law requiring that lenders ensure owners of buildings vulnerable to flooding had insurance if the buildings were used as collateral. 'Biggest Blunder in Banking History': Citibank Wired $900 Million to Lenders by Mistake. "The problem is that the company has not kept its promises," says analyst Joseph Dickerson of Atlantic Equities in London. IE 11 is not supported. Citibank acting as a loan agent to cosmetic company Revlon, accidentally transferred USD 900 million (about Rs 6,554 crore) to the companys lenders. Citigroup made a huge mistake last summer, when instead of transferring an $8 million interest payment from Revlon to its creditors, it transferred nearly $900 million of the banks own funds the full amount of principal on the loan that wasnt due for another few years. This collapsed in March. Global Business and Financial News, Stock Quotes, and Market Data and Analysis. We are disappointed that we have fallen short of our regulators expectations, and we are fully committed to thoroughly addressing the issues identified, the bank said in a statement. Prince is devoid of a long-term strategy andit will lead to his demise. "Even a minor change such as a confirmation dialog with an overview of what is about to happen could help Citi avoid making this mistake. And people familiar with the matter say that some Citi insiders bear responsibility for spreading inaccuracies. Last Updated: February 18, 2021, 15:18 IST. The stock soared 78% between the time Citicorp merged with Weill's Travelers Group in 1998 and the time he left, but it has gained only 14% during Prince's term. Citis other mistakes included failing to tell minority customers seeking mortgages that they were eligible for lower interest rates if they had other business with the bank. Greensill began working with the NHS as part of Citibank in 2012, but then set up his own firm. Just one year into her tenure, however, nobody is counting Fraser out. Principal is going to wash," the supervisor wrote when he approved the transaction, according to the court filing. Citigroup CEO faces disgruntled workers, regulators demands By the time Citigroup announced it was exiting retail banking in the country this year, the unit's market share had fallen by nearly half. Two months after one of its bankers accidentally sent nearly $1 billion to the wrong people, Citigroup agreed to pay $400 million to federal regulators over long-running problems keeping its daily operations under control. Arne Sorenson, Marriotts C.E.O., dies at 62. "The status quo is untenable. That has left some frustrated that both traditional and fintech competitors have a funding advantage, giving them an edge in hyper-competitive markets. It's amateur hour over there.". IRS frauds. It started with a call from Jamie Dimon, who asked fellow JPMorgan board member Mellody Hobson, Ariels co-C.E.O., for thoughts on how to help Black-owned businesses. Citigroup declined to say how many internal complaints it gathers or what percentage of investigations results in vindicated employees. Artius spent three months going through Origin Materials books and facilities, and then about 60 prospective investors questioned the team in a fund-raising effort. Ever since the 2008 financial crisis, when Citi required a $45 billion government bailout and had to split itself into separate operating units to survive, the sprawling institution has been limping along in third place among the four biggest U.S. banks, underwhelming its investors and irritating regulators, who in October imposed a wide-ranging directive to get itself in shape. Instead, overseas operations suffered from poor oversight and underinvestment, according to a former senior Citigroup executive. Last month, the bank's CFO conceded that the bank's returns already the lowest among the top six U.S. banks are likely to decline this year as Wall Street revenue slows down and the benefit from reserve releases recedes. It notifies the wrong recipient about the accidental transfer and requests to reverse the transaction at the earliest. (One person likened the complaint line to New York's 311 service.) "I'm very nervous about talking about the end of Chuck Prince," says Howard K. Mason, senior analyst at Sanford C. Bernstein & Co., a blue-chip research firm in New York. For an optimal experience visit our site on another browser. But the clock is ticking. But while rival banks saw their stocks surge last year and fintech players like Block's Cash App gained millions of users, Citigroup struggled. Instead, Citi (C) bank accidentally wired almost 100 times that amount, including $175 million to a hedge fund. In all, Citi (C) accidentally sent $900 million to Revlons lenders. Some lenders did return the money, but others did not. "Something's got to give," says a Wall Street veteran. We were the only bank that was up and running, she said in an interview. All rights reserved. Anyone can read what you share. Citi Some firms returned the money, but 10 others refused to return about $500 million of the funds, prompting Citigroup's failed lawsuit to recoup the payment. "They said 'We have so many complaints, we can't get ahead of this.'". Citigroup subcontractors are responsible for entering the transaction information into the Flexcube database in order to initiate the transfer process. Citi is already undergoing a management change. Traders allegedly coordinated currency bets in online chat rooms, exchanging information on customer orders and prices. This has generated a fascinating debate here at DealBook, and wed like to hear what you think: Email us at dealbook@nytimes.com. The decision follows what Furman called one of the biggest blunders in banking history: a full loan repayment of $893 million that Citibank mistakenly wired The banks, which include UBS, Barclays, Citibank, and JPMorgan, are accused of colluding to rig prices in the $6 trillion foreign-exchange market between 2007 and 2013. Two high-powered legal teams are jostling to bring a collective action against the banks in London courts, pursuing a US-style class-action strategy that could lead to huge payouts. One major component to that may be unifying the patchwork of systems the bank uses to track customers and transactions. New York law wants to discourage banks from making these kinds of mistakes, said Adam Abensohn of Quinn Emanuel, who represented the asset managers. The money it gets in return. President Nana Addo Dankwa Akufo-Addo has officially written to the Al Jazeera Media Network, demanding a retraction and apology for tarnishing his image over what he described as inaccurate and unfair reportage on Ghanas first gentleman in its Gold Mafia documentary. Since January, 2004, Citi's shares have gained just 10%, much less than rival Bank of America's 32% and JPMorgan Chase & Co.'s 37%. "To believe that Citibank, one of the most sophisticated financial institutions in the world, had made a mistake that had never happened before, to the tune of nearly $1 billion would have been borderline irrational" Furman said in the ruling. One of the edicts in the orders was for Citigroup to enhance the way it tracks and addresses employee complaints. These factors may contribute to defections as competitors across finance dangle pay raises to leave Citigroup, according to the people. Citi Asks Appeals Court to Reverse Ruling on Errant $500 Million Transfer. CNN name, logo and all associated elements and 2023 Cable News Network LP, LLLP. The states attorney general, Letitia James, accused the e-commerce giant of providing inadequate safety measures at facilities in Staten Island and Queens, and retaliating against employees who raised concerns. In this case, the onus is completely on the customer as the bank has only followed the instructions of its account holder. In fact, she said, turmoil in a country makes the banks purpose there clearer. It offers global financial services and has roughly 200 million customer accounts, operating in more than 160 countries around the world. "Executing on the plan while working on the consent order, that's the hard part," said Glenn Schorr, banking analyst at Evercore. Citi in June also hired former Bank of New York Mellon President Karen Peetz as its new chief administrative officer, in part to help comply with regulators' orders. As a result, Citigroup doesn't soak up low-cost deposits from U.S. customers like competitors do, making its funding costs the highest among rivals. 8 Financial Scams to Watch Out Citi paid more than $97 million to settle a criminal inquiry into Banamex. She is also shuffling senior executives within the bank, moving some longtime leaders into chairman or vice chair roles that are generally less involved in day-to-day operations and promoting others to oversee large parts of the banks business. But the transactions were reversed soon after the mistake was identified. She said it could be a way to bring poor Americans into the banking system and keep them away from predatory businesses like check-cashing shops and payday lenders. GST Collection in April 2023 At All-Time High of Rs 1.87 Lakh Cr; 'Great News For Economy', Says PM Modi. No 10 said on Monday it was launching an independent investigation into Camerons lobbying, led by the corporate lawyer and government adviser Nigel Boardman. Can such a huge amount of money reach the wrong beneficiary? Lazard to Cut Workforce 10% as CEO Sees Slump Through 2023, Person in the news: Jim Herbert, founder of a teetering First Republic, Architects of business change: Awaken the potential of the modern CFO, Cross River Bank ordered to correct unsafe lending practices, The Office of the Comptroller of the Currency (OCC), "We are disappointed that we have fallen short of our regulators' expectations, and we are fully committed to thoroughly addressing the issues identified in the Consent Orders," the bank said in a statement seen by. The 120-day deadline for the Fed's report on management accountability falls right when Fraser is expected to take the top role. The bank has said it is spending $1 billion this year on improving its risk management frameworks and controls. A federal judge ruled last week that Citigroup would not be able to recoup $500 million. It was late It didnt say whats included in those customer orders. It's hard to execute on all those fronts at the same time.". of IBM in 2012. Hackers Attack Citibank Pilfering over We believe we are entitled to the funds and will continue to pursue a complete recovery of them., Dow Jumps 150 Points And Energy Firms Lead Amid Texas Snow Storm (Forbes), This is a BETA experience. They illustrate how regulatory scrutiny has weighed on employee morale, making the already-difficult task of turning around Citigroup even harder as Fraser, 54, approaches her one-year anniversary leading the firm. DealBook got the first look at the brokers 195-page response, which reiterated Robinhoods previous comments about the capital constraints that forced it to halt trading in some stocks. [and] faced with these circumstances, the non-returning lenders believed, and were justified in believing, that the payments were intentional, Furman ruled on Friday. at Credit Suisse. Ariel Investments, the Chicago-based asset management firm, will today announce an initiative to scale minority-owned businesses by positioning them as preferred suppliers to the nations largest companies. "There have been a lot more judgments placed on superficial impressions than on the facts," says Mulcahy. It said it didnt have any contracts covering customer order execution with other hedge funds or private equity firms. In Mexico, Citi started a system that allows people to transfer money using QR codes scanned by smartphones; anyone sending or receiving less than $400 can use it for free. The use of corporate resources in connection with that relationship was the sole reason Thomson was asked to leave, this source maintains. "We take pride in the role that we play as a global leader in financial services and recognize that an operational error of this nature is unacceptable," the spokesperson told Insider. The judge called Citigroup's mistake one of the biggest blunders in banking history.. Text replies from Sunak in 2019, released after a freedom of information request, show that in April last year the chancellor told Cameron he had pushed the team in the Treasury to see if he could arrange full access to CCFF loans. In sum, banks have paid north of $12 billion in fines over the FX-rigging scandal, according to the FT. UBS initially escaped the 2019 European fines by disclosing its misconduct early, but the regulatory action was effectively an "open invitation for parties who may have been impacted by these cartels to sue these banks," as one lawyer told the BBC at the time. "I asked HR, 'Why does it take so long?'" It turned out, the subcontractor needed to check two more boxes. This collapsed in March. The transaction comprises the sale of the consumer banking businesses of Citibank India, which includes credit cards, retail banking, wealth management and consumer loans. The three men who succeeded Weill over the next two decades at Citigroup Chuck Prince, Vikram Pandit and Mike Corbat all struggled to make the disparate parts of the sprawling enterprise work. Bank Reponses To FinCEN Files Investigation - BuzzFeed News A desire for speedy capital brought it to SPAC land. of Citi wants to take a more global approach to issues and expand banking services for poor Americans even as the bank faces pressure to get itself in shape. Finally, the dual role of Crothers has prompted new worries about a revolving door between Whitehall and private companies that then benefit from government contracts. Citibank had actually sent out almost $900 million, not the $7.8 million it was trying to send. A huge winter storm disrupts business across America. At some point soon the Thomson scandal will die down. A US District Court judge ruled that Citi cant recover that amount. The company was part of the DAX index. The facility, which the firm says is the largest of its kind in the U.S., is part of an integrated approach to building better businesses, according to the firms C.E.O., Kewsong Lee. On Wednesday, Boris Johnson declined to rule out the possibility that more officials could have been connected to the company. Roll up your sleeves, keep your costs in line, focus on it every day, every week, every month.". These include the account numbers, IFSC Codes. He was given share options reportedly worth tens of millions of pounds. New York CNN Business . Sign up for free newsletters and get more CNBC delivered to your inbox. scandal at Citigroup Citi is embroiled in a court battle against some creditors who have refused to return the money. The financial toll on Citi of Wednesday's actions is significantly less than some big banks have seen from the OCC and the Fed. Use of the CNN name and/or logo on or as part of NEWS18.com does not derogate from the intellectual property rights of Cable News Network in respect of them. Remarkably, he was given official approval to do this. "If there's someone who can do it, she's the one.". Citi also agreed to pay a $400 million fine. The operational successes during Prince's tenurehe took over for the legendary dealmaker Weill in October, 2003have mostly been minor. This is not a niche product, Mr. Sim said. Greensill began working with the NHS as part of Citibank in 2012, but then set up his own firm. Ms. Hobson estimates that the opportunity is worth about $1 trillion. The comparisons with investment banking giants like Goldman and Morgan Stanley are less kind: Goldman is up 115%, Morgan Stanley, 40%. (NYT), BlackRock said it might vote against corporate directors if their companies do not have credible plans to cut carbon emissions. Citibank review: Citi bank is an absolute fraud! The credit facility is an extension of Carlyles goal for its portfolio company boards to have at least 30 percent diverse members by 2023. Other employees used Thomson's office to schmooze clients and even to host a recent book party for former Citi CEO Sanford I. Weill. The map was a thank-you gift from the banks Puerto Rico employees. He was at times openly defiant of Prince and sparred with him on decisions about investments and strategy, according to people who worked with both of them closely and declined to be named. That will allow Citi to draw more funds from deposits and rely less on the markets, lowering its cost of capital. Citigroup is fined $400 million over longstanding internal problems. Dive Brief: The Office of the Comptroller of the Currency (OCC) fined Citi $400 million Wednesday over persistent issues in risk management, data governance and Citibank A worried Citibank then moved the court demanding a full refund but it still has not received $USD 500 million from the accidental transfer. The cringe-worthy breakdown of Citis six-eye system for approving large transfers begins on page 9, and the disbelieving Bloomberg chats and emails among creditors Maybe the dog hit the keyboard starts on page 71. Federal banking regulators will fine Citibank $400 million for shortcomings in its risk management and other internal controls processes. ", Despite the recent allegations of profligacy, Thomson cultivated an image of fiscal restraint while he was CFO from 2000 to 2004. Citi | 2021 Annual Report The bank also takes too long to approve new products and sometimes fails to communicate changes to key internal stakeholders before announcements are made public, the people said. Allegations of currency-trade manipulation are bubbling up into a potential class-action suit against several big banks. A Time Warner Company. Allegations of currency-trade manipulation are bubbling up into a potential class-action suit against several big banks, according to a report from the Financial Times. Though the law generally requires money mistakenly wired to be returned to its sender, Furman in his ruling cited an exception in New York that allows recipients to keep funds if they discharge a valid debt and if the recipient is not aware of the mistake upon its receipt of the funds. Sunaks pledge that he had pushed the team to help also raised eyebrows. We dont leave a country when its in really bad shape, Ms. Fraser said. But how much of it was true? Or did other factors, just out of view, drive the ouster? In what a federal judge called "one of the biggest blunders in banking history," confusion regarding Citigroup's internal user interface cost the company over $500 million. The pledges are fantastic, but theyre going to be very hard to meet, Ms. Hobson said, because there are not enough minority-owned businesses of sufficient size to meet demand. In particular, they described a luxurious office insiders called the "Todd Mahal," and as examples of his extravagance, they said he had installed a fish tank and a wood-burning fireplace. Former board member and current Traveler's CEO Jay Fishman says: "To the extent [Prince] can get the organic engine growing, the opportunities are enormous.". Instead of transferring a $7.8 million interest payment to the cosmetic company's lenders, the bank transferred the full loan amount. He said there are many ways the platform could have been improved to avoid the $500 million mistake. Citibank acting as a loan agent to cosmetic company Revlon, accidentally transferred USD 900 million (about Rs 6,554 crore) to the companys lenders. In January, Citi reported a profit of $4.6 billion on revenue of $16.5 billion. While 2021 was the best year for the banking industry in more than two decades because of rising interest rates, Citigroup didn't participate in the rally. As a subscriber, you have 10 gift articles to give each month. Ms. Fraser will be tasked with turning around Citi,which has been limping along in third place among the four biggest U.S. banks. Other employees used Thomson's office to schmooze clients and even to host a recent book Citi But in 2016, after leaving office, Cameron became an adviser to Greensill Capital. Its pitch: Not only does it replace petroleum-based plastics, the start-up says that its production process actually removes atmospheric carbon. The former PM said reports of the value of his share options had been exaggerated, but declined to say how much they would have been worth. Meanwhile, the synergies from the bank's global sprawl after Weill acquired companies from Sao Paulo to Tokyo never materialized. A Citigroup spokesperson told Insider the company is working to update its loan operations platform. He told BusinessWeek that he has "no comment on the smear campaign I've been reading in the media" and is proud of his accomplishments at Citi. Anyone can read what you share. Topics include: Commercial banking, payments, technology, risk, regulations, policy, Topics covered: bank/fintech relationship, banks buying fintechs, regulation, risk of neobanks and much more. It shouldnt happen in a normal scenario. If it were, Prince would be gone by now. As the crisis dragged on, Citigroup's soured assets and risky bets forced it to take the biggest public bailout among U.S. banks. In a separate statement to DealBook, a Robinhood spokesperson said: Robinhood does not receive any money from Citadel Securities other than rebates received through Payment for Order Flow, all of which are disclosed publicly., Ms. Warrens response: Whats still not clear from Robinhoods response to my questions is the full extent of Robinhoods ties to giant hedge funds and market makers. According to bankers, the bank immediately begins their SOP (standard operating procedure) in such cases. Separately, HSBC is facing allegations from a former client of FX fraud in front of London's High Court. Indeed, to believe otherwiseto believe that Citibank, one of the most sophisticated financial institutions in the world, had made a mistake that had never happened before, to the tune of nearly $1 billionwould have been borderline irrational., We strongly disagree with this decision and intend to appeal, a Citi spokesperson said Tuesday. "Hopefully I won't be on my deathbed and still waiting for Citi to get to book value.". She was named president in October 2019, a title that put her in line to take over from Mr. Corbat. That prediction now seems prescient as the two competing class-action cases are being bankrolled by litigation financiers who buy equity in the outcome of a case. Best Debt Consolidation Loans for Bad Credit, Personal Loans for 580 Credit Score or Lower, Personal Loans for 670 Credit Score or Lower. The bank accidentally paid out nearly $1 billion to Revlon creditors. The bank has already committed to spending significant sums on revamping its systems; making its global operations more uniform; retraining employees; and investing in new technology to try to compete with online competitors such as Rocket Mortgage and PayPal that make loans and provide payment services without relying on traditional industry players.