FINRA Fines Citigroup Global Markets Over Flawed AML Procedures
The Financial Industry Regulatory Authority has censured Citigroup Global Markets Inc. and fined the firm $250,000 after an error in rolling out revised anti-money laundering procedures delayed the filing of 88 suspicious activity reports.
FINRA found that from January 2022 through February 2023, the firm failed to establish and implement AML policies and procedures that could reasonably be expected to detect and cause the reporting of suspicious transactions, violating FINRA Rules 3310(a) and 2010. Citigroup Global Markets consented to the censure and fine without admitting or denying the findings. FINRA accepted the firm’s letter of acceptance, waiver, and consent Nov. 6.
The lapse centered on the firm’s Personal Wealth Management division, which serves retail customers. During the period, registered representatives and support staff conducted an initial review of potential fraud events, such as cyber-events, account takeovers, and identity thefts. They then escalated those events to a risk and controls team responsible for passing potentially reportable events to the business units that file suspicious activity reports, or SARs.
In January 2022, the firm’s AML compliance risk management team proposed revised escalation procedures that called for escalating all potential fraud events, regardless of value or confirmed loss. Because of an employee’s error, the procedures as implemented instead required escalation only “when there is confirmed fraud and/or losses,” even when an event met or could have met the legal criteria for a SAR filing, FINRA found. Applying that standard delayed the escalation of 171 potential fraud events.
The settlement cites October 2016 guidance from the Financial Crimes Enforcement Network that an otherwise reportable cyber-event should be reported even if it was unsuccessful.
Citigroup Global Markets discovered the error in February 2023 during a self-initiated review of fraud-event escalations and self-reported the matter to FINRA. The firm retrained employees, dropped the confirmed-fraud-or-loss requirement, and published revised procedures in May 2023.
In setting sanctions, FINRA said it considered that the firm identified the failure itself, began reviewing its scope before any regulator intervened, and provided the results of that review to FINRA. FINRA also credited the firm’s remediation, which included retroactively filing the 88 SARs and automating the escalation process.
Headquartered in New York, Citigroup Global Markets has been a FINRA member since 1936 and employs about 7,000 registered representatives in more than 700 branch offices.
In January, FINRA censured and fined three Cetera Financial Group broker-dealers $1.1 million over AML lapses involving low-priced securities.
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