Citibank Financial Woes and a $400 Million Fine


Financial institutions are contemporarily forced to incorporate risk management tools, enabling them to manage any unexpected risks or events. Credit Derivatives, technological innovation, and networked-enabled devices are tools utilized by financial institutions for risk management. A large financial institution such as Citibank has faced a serious crisis in recent times which became a global concern. Stringent measures have resultantly been introduced to the operations of the organization owing to the scandal.

The work explores the monetary issue Citibank faces and the associated problems such as legal pursuits and systems failure. Citibank has neglected its executive management roles, and the error was mainly due to laxity and negligence, which led to it being fined $400 million. The fine was, therefore, justifiable, and the organization needs to improve its management and oversight role to maintain its competitive edge.

Introduction and Background Information

Citibank group was formed in 1982 in New York and later evolved into New York’s first national bank. It continued its expansion, opening branches all over the world (Citigroup, 2021). Currently, the bank has approximately 2700 branches globally in about 19 countries. According to their website, Citigroup (2021) engages in money-related business with operations including personal loans, credit cards, lines of credit, mortgages, and commercial loans. Citibank illustrated that its strategic plan focuses on the markets of Mexico, Asia, and the U.S. while providing the best of services in wealth management, use of credit cards, retail banking, and retail services (Citi, 2019). In such a way, the company has long-term plans vital for its development.

Problem Statement

The company has endured several challenges during its evolution. These include issues with mortgage assets and also on keeping up with regulations and government policies while it was opening some of its branches (Vanatta, 2016). All these complexities preconditioned the emergence of numerous financial crises resolved with the help of the government. The height of these challenges occurred when two bank employees recently wrongly wired $900 million meant to pay creditors instead of $9.8 million. Global and Federal regulation’s attention was drawn to the matter when legal litigations ensued. Schroeder (2020) illustrates that the Fed regulators found the company guilty of having longstanding operational deficiencies and lapses. Out of these issues, the company was fined $400 million.

The accidental transfer of almost $900 million by Citibank employees to lenders and beauty products manufacturers attracted the Federal Reserve and the Office of the Comptroller of the Currency. According to Flitter (2020), the Fed regulators had fined the bank due to a number of reasons, including the inability to properly control its internal operations, engaging in banking activities that are both unsafe as well as unsound, and lastly, the failure to effectively establish a risk management outline. Citibank had to agree and pay a $400 million fine to the regulators while promising to improve.

In a correct transaction, a significant sum of money such as $900 million cannot be sent to the wrong recipient due to the strict and procedural measures conducted before a transaction is done. After cross-checking the transaction details, the sender is often provided with a notification or an acknowledgment receipt. Errors by the bank could be minimal unless the recipient sent the wrong account details. Citibank, as described by Flitter (2020), promised that with the new transition in leadership, with Jane Fraser replacing Michael Corbat, the institution would work towards making clear bank stewardship, clear pay guidelines, and elaborated executive roles. However, the factors leading to the emergence of the problem with the transaction should be analyzed and used as the basis for recommendations.


The accounting and business finance at Citibank did not take care of their expected roles, and their failure contributed to the crisis Citibank faced. In their statement, according to Schroeder (2020), the accidental transfers were just unmatched banking errors of high magnitude. Apart from the $400 million fine, Schroeder (2020) depicts that the firm was slapped with $70 million for violating regulatory orders, including the duration for which foreclosed property can be held by the bank, flooding, and house insurance regulations. The company’s total loss was about $900 million, including $400 million added to legal fees, regulatory and maintenance fees that have not been mentioned. These translate to almost two billion dollars.

The Citibank group was the acting loan agent of Revlon. As Schroeder (2020) illustrates, the bank had intended to transfer only $7.8 million interests to the group, but instead, they had wired $893 million, blaming it on human error. The other firms that refused to refund the money totaling $501 million include Symphony Asset Management, Brigade Capital Management, and HPS Investment Partners (Schroeder, 2020). It preconditioned the emergence of a serious issue that should be resolved.

Strategic Analysis and Citibank’s Associated Problems

Strategic analysis of an organization is essential as it provides a platform where objectives are formulated, planned for execution, and enable the attainment of the set goals. Strategic planning and analysis give room for organizations to predict future expectations and also provide alternative approaches to unexpected events (Rothaermel, 2018). The research could either be internal or external. The internal one works on improving the firm’s image, work on strengths and weaknesses, and general functioning of all its operations (Rothaermel, 2018). External analysis, on the other hand, will explore and focus on fluctuating market demands, knowledge of aggressive competitors, and how to achieve customer satisfaction.

The financial crisis is often caused by the erosion of ethics that not only affects the organization but the society in which it operates, or even the nation at large. According to Chen et al. (2017), the U.S. financial crisis between the years 2007 and 2009 had resulted in serious overwhelming effects on the nation’s economy, high unemployment levels, protracted closure of mortgages, and a significant decline in gross domestic product.

The financial crisis, as Chen et al. (2017) further illustrate, was created, among many other reasons, by disgraceful banking practices. Citibank’s $900 million error can be in this case categorized under the mentioned banking practices that are disgraceful, which results in causing financial crisis not only for the institution but nationwide. The error blamed on human and system failure can be concluded to the erosion of work ethics by the bank employees.

Citibank describes its strategic objectives and mission plans in its 2019 annual report. The company’s major mission is to ensure that progress and growth are enabled (Citi, 2019). The strategic mission is further illustrated as focused on providing a platform for economic progress and rise through monetary services (Olenick, 2020). The financial assistance provided by the organization to its customers includes giving loans, capital market assessing and making of payments on behalf of clients, and ensuring all assets are safeguarded (Citi, 2019).

It guarantees a high level of income and a significant presence in the market. Citibank also has a strategy for economic growth and progress. It presupposes the provision of loans to both small and large companies (Koning, 2020). Out of the loans, the companies will add to their stock, create employment opportunities, grow and create real, sustainable economic surroundings. Lending enables organizations and customers to access operating capital, optimize their daily routine processes, and pay for exports or overseas transactions.

Citibank’s scandal raised the main concerns that were noted and punished by the Federal currency regulators. According to Olenick (2020), these issues included compliance risk management, internal controls, enterprise-wide risk management, and data governance. These problems have been longstanding, despite being noticed earlier by the regulators and the leaders being advised to correct them. The bank said that it is disappointed for falling short of what was expected of them by regulators and promised to improve plus work on the mentioned concerns while adhering to the required guidelines (Citi, 2019). However, the problem remained and affected the work of the firm.

Citibank’s financial crisis deteriorated their image, especially when they sued Brigade Capital Management. The institution was petitioned over $175 million, but the organization refused to pay back, saying it had the right to the money (Flitter, 2020). The crisis caused by the erroneous money transfer showed that various internal areas such as business communication, information management system, business leadership, and the legal environment of business demanded improvement.

Legal Environment of Business

The bank faced a legal problem when it had requested all the recipient groups to refund the money erroneously transferred to them. According to Koning (2020), the bank was instead supposed to wire $9 million to its debtors but instead sent $900 million. All the other recipients did a refund except for the reprobate organization named Brigade Capital Management. The bank was owing to them only $1.5 million (Koning, 2020).

A sixty-day legal battle then ensued between the two organizations in an attempt by the bank to recover its funds. Still, Brigade Capital and the other companies completely held that they had the right to the money in their possession (Koning, 2020). The investment company had testified in court, as illustrated by Dolmetsch et al. (2021), that the money wired to them was the total money they had given Citigroup for loans. Although, the agreement between them and the bank had been breached on when and how to send the entire sum.

The bank, therefore, lost because of the existence of rude violations and problems in its work. According to Schroeder (2020), the United States District Judge, Furman Jesse, had pronounced that the transfers made by the bank were irrevocable since they were full transactions and the concept of finality had been applied. The court battle is still ongoing, and a final verdict has not yet been given, and Citibank has the plan to appeal the case.

Citibank was not satisfied with the court decision because of its negative consequences for the company. It promised to appeal the case stating that the litigation was to continue till they recoup their money from the investments groups (Citi, 2019). The group’s spokesperson, Danielle Romero, promised that the litigation was not yet over till they recover their money (Citi, 2019). On the other hand, the firm’s spokesperson representing the Investment groups in court, Robert Emanuel, confirmed that they were contented with Judge Furman’s thorough and comprehensive decision (Citi, 2019). The error by the bank thus created a problem touching on the legal environment of the business.

Accounting and Business Finance

In business accounting and finance, finality is one of the fundamental ideas. According to Koning (2020), after payment is done and has passed a certain stage, the recipient owns the money irrevocably. This finality concept formed the basis for which the Brigade organization held its legal position, and the US Judge Furman Jesse made his ruling. Koning (2020) illustrates that if the finality guarantee is not incorporated in transactions, then there are high chances of economic activity being seized up. In such a way, the concept can be viewed as one of the fundamentals of the accounting sphere.

Information Management System

Information management systems are designed to enable an organization to properly manage the processing, flow, and use of information. According to Alnassar and Othman (2016), an example of an information management tool is the financial Credit Derivatives-CDs. It is a risk management method used by financial institutions to manage unexpected risks efficiently. In the study done by Alnassar and Othman (2016), the crisis faced by Citibank for the $900 million error was partly blamed on the credit derivatives system that exacerbated the transfer to a level of creating a crisis that attracted global attention. The study found out that the system majorly contributed to promoting the crisis, especially when conducting the transaction, and should only be used in internal operations (Alnassar & Othman, 2016). It also helped to underline the nature of the problem and analyze it.

Citibank failed to properly maintain their information management systems like the credit derivatives, which led to their image deterioration. Lack of proper management of their systems added to their loss through the 400 million dollar fine (Flitter, 2020). Their attempt to recoup the money did not come to pass since the court had decided that the money was irrevocable. Avoidance of such negligence could have prevented such conspicuous losses, which attracted the attention of the Fed.

Business Communication

Communication is essential in any business organization. Use of electronic media or even paper communication depending on the urgency, audience, and safety will determine the choice and means with which information is passed. According to Chen et al. (2017), financial organizations have invested in financial, technological innovation like blockchains, big data, cloud computing, search engines, and mobile internet. All these technological innovations are expected to aid in better communication and enhanced decision-making for effective organizational management.

Citibank‚Äôs communication might have faulted somewhere and preconditioned the creation of the $900 million crisis. Chen et al. (2017) say, Citibank among many other banks, invested in these technological innovations to aid in their transactions. Negligence or lack of regular maintenance of the bank‚Äôs communication devices and information management systems could have resulted in the fault. Before transactions are conducted, specific financial procedures should be performed by all concerned authorities to avoid mistakes. Therefore, the Fed‚Äôs punishment of a $400 million fine was justified, especially when they placed ‚Äúinability to properly control its internal operations‚ÄĚ in their statement as reported by Flitter (2020, para. 4) as part of their reason for the fine. It means that there are clear reasons for applying such measures to the problem.

Business Leadership

Citibank’s leadership had failed in performing their expected roles in oversight and effective management. Business leadership requires leaders to ensure finer details are properly scrutinized to avoid throwing the business into jeopardy (Rothaermel, 2018). According to Flitter (2020), the Citibank group’s management is undergoing a leadership transition where Jane Fraser is expected to replace Michael Corbat. The early retirement of Corbat is associated with the lack of compliance issues, as illustrated by Schroeder (2020), and after retirement, the firm expects to work towards enhancing its working profits to about $1 billion. In such a way, the leaders’ inability to meet the current demands results in growing problems.

The group is also expected to clarify the exact roles of the president of the group and other executives, their positions, and the connection between them for efficient propelling of the bank in the future. The statement issued by the bank, as illustrated by Flitter (2020), showed that they had promised to look into the issues that raised concerns and were identified by the regulatory authorities. The organization’s leader, CEO Jane Fraser, according to Schroeder (2020), promised in a statement to prioritize the improvement of the company’s control systems and the enhancement of risk management procedures. She also said that investments would be mainly directed towards the organization’s system infrastructure, risk, and control management systems. Laxity in leadership led from one thing to the other. The concerns raised by the Fed regulators showed that internal longstanding factors had not been resolved, and the systems were not able to even catch money launderers.

Analysis of the Citibank’s Error

Significant errors mentioned above caused substantial harm to the firm. Even though it was an inappropriate decision, money transfers are often approved and counterchecked by more than three authorities or signatories. The error by two bankers at Citigroup shows that some people did not perform their outright duties to officiate the transaction. According to Dolmetsch et al. (2021), U.S. Judge Furman had mentioned that such a huge financial mistake made by a sophisticated institution like Citibank was illogical. The total amount to be sent should have been their guideline on how much to transfer and to whom. Probably they should have paid the different organizations individually and avoid a crisis. The concept of finality should have enabled them to realize the error before clicking the ‚Äėsend‚Äô button.

Administrative agents issuing loans and other financial services were exposed to higher risks, both regulatory and operational. The court’s decision created a long-lasting impact on the group and the roles of these agents regarding the issuance and collection of loans. As Surane and Burnsen (2020) depict, the main function of these administrative loan agents was to ensure they took care of other housekeeping services apart from distributing and collecting loans. Instead of doing their duties, the agents mentioned in their court filing paper that the Revlon investments company had agreed to have all or repurchase a part of the loan (Citi, 2019). They had failed in their loan-housekeeping services by selecting the wrong system options in the transaction.

The agents, in this case, did not check finer details before sending the money to the investment groups. As Dolmetsch et al. (2021) state, the bank was the best party to countercheck any transfers and prevent any devastating faults with dire consequences, such as Citigroup, and as the judge mentioned, banks should bear the risk of loss for any mistake. The aftermath cost the firm a lot, and the impact of the ruling was in the future going to tame banks on increasing methods of recouping erroneous payments while minimizing any gaffes at all cost.

The financial crisis and limited liquid capital affected the firm’s daily operations. Olenick (2020) describes that Revlon had found itself in the middle of a battle with a loan in 2016 given by the lenders. The wrong transaction done by Citibank came in the middle of the crisis Revlon was undergoing that made the lenders assume that Revlon had paid their loan. Since the matter was almost being made a court case, the lenders could not refund the money back to Citibank, yet their loan had been paid in full hence saving Revlon from long lawsuits.

Conflicting Opinions from the Crisis

Citi had made a mistake and had accepted it in front of the Fed regulators and the court in Manhattan. However, the main question is whether they knew it was their mistake and had to go to court for the rogue investments group to refund the money. The two firms had breached the agreements of their contract. Consideration of the terms of the deal might have enabled solving of the case amicably. The court and the recipient group had agreed that they could have the money since it was irrevocable (Olenick, 2020). However, it remains unclear if the group disregarded the idea of finality in business finance and management of transactions or tried to appeal to human error.

Appealing for the case is the next action plan for Citigroup, the company stated that they had the right to recoup their money. If they had lost the case confirming their guilt, that apart from the error being on their side, the issues identified by the regulators were true, and they had promised to work on them (Olenick, 2020). The evidence they had presented in court had not favored them either, resulting in losing the case to the investment groups. However, the major concern for discussion is new evidence Citi group can present in the court of appeal to win the litigation and recover their money.

Breach of agreement between Citigroup and the Investment companies had occurred when the recipients declined to refund the money. According to Sorkin et al. (2021), the institution was owing to the lenders a serious amount of money, but the principal quantity was not yet to be paid until a few more years. According to the agreement between the two firms, a notification had to be issued to the lenders three days prior to sending the principal amount. The error made by the bank had a negative impact on their business relationship. It remains unclear if the recipients, therefore, will eventually cut ties with the bank what strategic actions can be performed to improve the situation.

Financial institutions and any other business often implement and incorporate stringent measures and due processes before confirming any monetary transactions. Citibank, as a financial institution, knows exactly all these principles, however, it could have disregarded them (Business Today, 2021). The human and system error would probably have been prevented if due diligence was followed and all concerned signatories and authorities performed their tasks. Resultantly, it should be assumed that these measures would have been overlooked by the personnel in the bank, leaving the whole transaction to the two bankers (Rothaermel, 2018).

Furthermore, relying on systems that probably are not well maintained and containing faults contributed to the failures. Based on the fact that laid down principles and transactional guidelines were not diligently followed, then all the concerned authorities be sacked for that reason, or we don the fact that the system failure contributed more to the crisis despite all the due measures being followed.

Recommendations and Action Plans

Blunders in banks are rare, and the one that happened at Citibank was one of its kind. The consequences of such mistakes were dire, with the company losing a significant sum of money, tarnishing its image, and suffering from the reduction of customers and investors, and also engaging in legal battles. Out of the whole problem, the following recommendations might be helpful to the bank and other concerned financial institutions;

  1. All financial, decision support, and information management systems should be constantly serviced and maintained to ensure that they are always in good working conditions (Brigham & Ehrhardt, 2019).
  2. Bank authorities and signatories should always ensure that they countercheck transactions before they are made, even if all the systems are well maintained (Cottrell et al., 2018).
  3. The administration of these financial institutions should execute their oversight roles appropriately through supervision, rewarding, and correction (Gordon et al., 2018). If Citibank should have done this, maybe possible money launderers could have been caught, the internal problems identified by the Fed could have been solved, and the crisis could have been prevented.
  4. Business partnerships should be based on mutual agreements, and in case of problems or unexpected circumstances, both parties should find a solution (Gordon et al., 2018). This should have been the case between Citibank and Revlon lending groups.
  5. Employees or staff of financial organizations should be encouraged to regularly and gradually train and upgrade their skills to ensure they remain relevant in the highly competitive global market (Rothaermel, 2018).
  6. Money business is very sensitive to employers, employees, customers, and the authorities (Bandara et al., 2018). Care to finer details and any little mishaps should be looked into immediately they are identified, and appropriate measures are taken to solve, curtail or mitigate them.
  7. Financial institutions are advised to invest in Financial Technology-FinTech, which will enable better monitoring and controlling of transactions and possible fast and efficient curbing and sealing of loopholes. Technology will allow the organization to overhaul its financial affairs, redefine organizational strategy, manage and tame human resources and revolute the entire business (Brigham & Ehrhardt, 2019).


Businesses engaging in financial and related operations, such as Citibank, are often closely monitored since they operate in sensitive areas. Regarding the fact that they are involved in critical activities, such organizations should maintain high standards of their management systems, be at par with legal and regulatory requirements and even sustain their relationships with customers and their environment. Citibank got involved in a crisis with global attention, in legal battles, and got fined because it did not perform its due diligence and failed to maintain its system operations.


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BusinessEssay. "Citibank Financial Woes and a $400 Million Fine." November 30, 2022.