Five years after Citi triggered the biggest fat finger of all time when it mistakenly sent $900 million to creditors engaged in a contentious battle over the debt of cosmetics group Revlon, a transaction which resulted in a brutal legal fight and a crushing plunge in its reputation, the bank has done it again.
According to the FT, Citigroup credited a client’s account with $81tn when it meant to send only $280, an error that surely hinder the bank’s attempt to persuade regulators that it has fixed long-standing operational issues.
Citi’s $81tn near miss in April was due to an input error and a back-up system with a cumbersome user interface, according to FT sources. In mid-March, four transactions totaling $280 destined for a customer’s escrow account in Brazil had been blocked by a screen that catches payments that are potential sanction violations. The payment was quickly cleared, but nonetheless remained stuck in the bank’s system and unable to be completed normally.
Citi’s technology team instructed the payments processing employee to manually input the transactions into a rarely used back-up screen. One quirk of the program was that the amount field came pre-populated with 15 zeros, which the person inputting a transaction needed to delete. Needless to say, that did not happen.
The erroneous internal transfer, which occurred last April and was first reported by the FT, was missed by both a payments employee and a second official assigned to check the transaction before it was approved to be processed at the start of business the following day.
A third employee detected a problem with the bank’s account balances, catching the payment 90 minutes after it was posted. The payment was reversed several hours later, according to an internal account of the event seen by the Financial Times and two people familiar with the event.
No funds left Citi, which only disclosed the “near miss” to the Federal Reserve and Office of the Comptroller of the Currency. The bank said its “detective controls promptly identified the inputting error between two Citi ledger accounts and we reversed the entry” and that these mechanisms “would have also stopped any funds leaving the bank”.
It added: “While there was no impact to the bank or our client, the episode underscores our continued efforts to continue eliminating manual processes and automating controls.” Considering the bank's "manual processes" just transferred 3 times the GDP of the US to some unknown account, it is safe to say that there are absolutely no controls whatsoever.
According to the FT, a total of 10 near misses - incidents when a bank processes the wrong amount but is ultimately able to recover the funds - of $1bn or greater occurred at Citi last year. The figure was down slightly from 13 the previous year. Citi declined to comment on this broader set of events.
Near misses do not need to be reported to regulators, meaning there is no comprehensive public data on how often these incidents occur across the sector. Still, former regulators and bank risk managers said near misses of greater than $1bn were unusual across the US bank industry.
The series of near misses at Citi highlights how the Wall Street bank is struggling to repair its operational troubles nearly five years after it mistakenly sent $900mn to creditors engaged in a contentious battle over the debt of cosmetics group Revlon, and who then refused to return the bulk of the transfer. Readers may recall that it was Citi’s mistaken Revlon payout led to the ousting of then-CEO Michael Corbat, big fines and the imposition of regulatory consent orders requiring it to fix the issues. Clearly the "issues" have not been fixed.
Jane Fraser, who took over as Citi’s top executive from Corbat in 2021, has described fixing Citi’s regulatory issues as her “top priority”. Still, the group was fined $136mn last year by the OCC and Federal Reserve for failing to correct problems in risk control and data management.
Which brings up an interesting question: what would you do if you woke up on morning and found a dollar number with 15 zeros behind it? Here is one money laundering proposal from Tanning Salon Don.
Wake up, see $81t in my account. Start moving fast
Load up 10 flash drives with $1b in every kind of Crypto and head straight to the airport
Give my fiancé 10 minutes to decide if she’s coming with me
We will probably see our friends and family again but I don’t know
Once in Columbia lay low a few days. Distribute flash drives in random hotel rooms. Send one back to my family with the note “I’m alive. Put this flash drive somewhere safe, don’t tell anyone about this”
Then find a coke dealer. “Let me talk to your boss for $10k. Let me talk to his boss for $20k”
“I need a new identity and European passport. Can pay any amount”
Then I fly somewhere in Europe and open a tanning salon / med spa to start laundering money. Within a year start claiming $10m of EBITDA and paying taxes.
Then start an AI company burning a ton of money
Fly to Saudi Arabia for VC funding but in the meetings I put my cards on the table
“Listen. I’ll give you $5b of crypto if you legitimately buy my AI business for $700m”
Just need one taker
Buy a gold immigration card
Move back to the states
You now have a legitimate $700m in the system and a few flash drives you can use if ever needed
