Citibank Customer Service

RBI imposes Rs 25 lakh fine on Citibank

MUMBAI: The Reserve Bank of India on Monday imposed a penalty of 25 lakh on Citibank for violation of anti money laundering (AML) and know your customer norms that led to a 400-crore fraud at one of its branches in Gurgaon.

"The failure in following the KYC/AML guidelines while opening accounts led to the perpetration of a fraud at its Gurgaon branch," said RBI in a statement.

In December 2010, a Citibank employee, Shivraj Puri, was accused of luring 40 high net-worth individuals and corporate entities to invest in bogus investment schemes, promising returns beyond normal securities available in the market while diverting funds to wagering in the stock market.

Puri, who perpetrated the 400-crore fraud, not only duped a string of wealthy individuals, but also duped the Munjals-controlled Hero group to invest close to 200 crore in the sham investment scheme that promised a high rate of return.

A case was filed against the Citi employee in Gurgaon and the police had arrested Puri and Sanjay Gupta, the chief financial officer of Hero Corporate Services, which is a part of the Hero Group. Currently, the case is subjudice and under investigation.

The central bank had issued a show cause notice to the bank on April 21, 2011, with a possible penalty of 50 lakh, in response to which the bank submitted a written reply dated May 6, 2011.

The bank also had a personal hearing on June 7 with RBI, following which it came to the conclusion that violations were substantiated and warranted imposition of the penalty. Post the meeting, RBI cut the monetary penalty, a person familiar with the matter said.

The wealth management business of banks has been under the regulatory scanner. Most recently, Standard Chartered Bank is said to have sold securities worth up to 200 crore to its private banking and wealth management clients with a commitment to buy them back.

However, under current regulations, the buyback option is not allowed. Recently, RBI asked banks to disclose information on policy, procedures and size of the business they handle of wealthy individuals. The rules are being made under the aegis of Financial Stability and Development Council (FSDC), set up by the Indian government in December 2010. FSDC is chaired by finance minister Pranab Mukherjee.

Wealth management, often used loosely with private banking, a similar service for lower amounts, was introduced by foreign banks when the local financial services was dominated by the public sector banks that were not sophisticated.

Citibank fails Customer Service test - Javelin Strategy & Research ...

As has been reported multiple times in the press, Citibank was recently the subject of a data breach. At first, Citibank estimated that the breach ‘only’ impacted 200,000 account holders. Later, it was revealed by Citi that up to 360,000 account holders had been affected.

In an astonishing display of hubris, Citi claimed that this only constituted a limited exposure for their customers. So, the approximate one month delay in reporting this breach not included, Citi’s conclusion that this is a ‘limited’ event is simply not supported by the data.

I received a copy today (I am not a Citi customer) from a third party of the letter sent by Citi to its affected customers. Know what Citi is doing about this breach? Absolutely nothing. According to Citi’s letter, you should ‘remain vigilant’, ‘contact the FTC’ to learn more about ID theft, ‘you can place a fraud alert’ on your credit file’, you can ‘request one free credit report a year’ and by the way, we have made improvements to our system so that this does not happen again. Citi is reissuing cards (if the breach wasn’t real serious, why would they need to re-issue cards?) and I am sure that the PR department would tell you that it is out of an abundance of cautions.  But when it comes to providing their consumers with real tools to protect their identity, what exactly is Citi doing? Based on this letter, not much. 

Javelin’s data shows very clearly that recipients of letters such as these are six times more likely to be the victims of ID Fraud than the average consumer. Did Citi offer ID Fraud Protection service or credit monitoring? No, because according to Citi, the data breach was ‘limited’.

What exactly was breached? Let’s see, name, account number and contact information.  Do you think that a fraudster could fashion an automated spear phishing attack with that information against the 360,000 Citi customers whose information was taken?  Do you think that some of them might have taken the bait and now have a MITB trojan sitting on their machine?  Does Citi offer any sort of MITB protection for its customers?  Nope, with Citi, your data has been breached, we give you a new card but other than that, you are on your own. 

Of course, Citi will cover any fraudulent charges made on your account but what about the ‘hassle factor’ of having to deal with the fraud to begin with?  Will Citi compensate you for any new accounts that might have been opened in your name by using the card information that was breached?  Hard to do?  Maybe – but take the card information and phishing additional informaton from social or other media and you have an environment that is ripe for fraud.  Gone are the days when an FI can determine which data is worth protecting – ALL of the data given by the consumer to the FI must be protected and to the highest possible standard.

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