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Citigroup's inability to hire a compliance professional cost it $127m

Citigroup's "fat finger" error of May 2nd 2022 has turned out to be expensive. Not only did the bank lose $48m (£38m) on the day by virtue of the mistake on its London Delta 1 desk, but it has now been fined £62m by UK regulators. 

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The verdicts of both the FCA and PRA, published today, make harsh reading for Citi's equities business, which is already beleaguered by accusations of a culture of harassment and bullying. They underline the importance of systems, but they also underline the importance of individuals, and particularly of individuals in compliance. 

On the day that the fat finger error took place, the FCA notes that Citi was understaffed. It was a Bank Holiday in London and people monitoring the execution of trades using CitiSmart, the bank's algorithmic trading system, were on leave. Instead, therefore, the monitoring function had been passed to the bank's the electronic execution desk, which failed to immediately apprehend the importance of the mistake. When another Citi team, the 'E-Trading Risk and Controls Team' (ETRC), flagged the trade to the bank's electronic execution desk, no one responded. The ETRC team was compelled to send another email, four hours later. 

The FCA says things might have been different if only the desk monitoring the CitiSmart trades had been properly staffed. Not only were people on holiday, but Citi had an open role, which the FCA says the bank had been trying to fill "for a year" despite its "efforts" to fill the vacancy.  

The implication is that had Citi filled its open compliance job, it could have saved itself $100m in combined losses and fines. Underappreciated compliance staff everywhere can rejoice. 

In a statement regarding today's fine, a spokeswoman for Citi said: “We are pleased to resolve this matter from more than two years ago, which arose from an individual error that was identified and corrected within minutes. We immediately took steps to strengthen our systems and controls, and remain committed to ensuring full regulatory compliance.”

The PRA and FCA's verdicts suggest that the "individual error" in 2022 was more than just a fleeting issue, however. The PRA specifically notes that, "the duration of the Firm’s breaches persisted over a period of 4 years," and that an array of previous incidents had occurred and that problems had been flagged, dating back to 2018. 

Among other things, the PRA suggests there were failings in the management of Citi's equities' business: there were no consistent reviews of alerts regarding breaches of pre-trade validation checks and no one ensured the checks were functioning correctly. Managers of the equities business didn't impose "adequate governance structures" around eTrading. And - most damningly - equity derivatives traders themselves made 985 changes to Citi's pre-trade validation checks in a 13-month period between January 2020 and February 2021 without getting sign-off from the trading risk and compliance council. 

Not only was Citi's compliance team understaffed, therefore, but it appears to have been bypassed. Although Citi has acted to remediate the problems, they stand to increase the pressure on Fater Belbachir, the bank's London-based global head of equities, who joined from Barclays in August 2020. Belbachir is not mentioned personally by either regulator.

Both the FCA and PRA note that many of the systematic failures of controls in the London equities team didn't exist in New York. 

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AUTHORSarah Butcher Global Editor
  • Do
    24 May 2024

    I am very skeptical that extra compliance staff would have made much of a difference. The FCA report describes a lot of detail of the many checks in place. What seems to have been lacking was appropriate supervision for the delta 1 desk. No way should the trader have been able to swat away alerts like those mentioned without some else’s approval. The electronic surveillance desk was probably running with minimal junior staff who might have been afraid to challenge the delta1 desk.

  • GB
    23 May 2024

    I am a very experienced compliance officer with proven experience at trade surveillance I had applied for the role in question was rejected as the head of business rules interpretation on best execution incorrectly differed from mine . Great work and very insightful assessment from FCA and PRA

  • Jo
    John A Smith
    22 May 2024

    The title is incorrect. They were fined £100m, not $100m. There is a big difference.

  • Ex
    Ex Citibanker
    22 May 2024

    No surprise. Incompetence is a star feature at this bank. Layoff thousands of risk professionals and this is the result. Jane should been ridden out on a rail to Bora Bora. Abject failure of a CEO.

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