Citigroup fined £62m by UK regulators over ‘fat finger’ mistake

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UK regulators have fined Citigroup £62 million for failing to prevent a $1.4 billion trading error that briefly roiled European stock markets.

The May 2022 incident was one of several spanning a four-year period in which regulators said Citi’s business controls were inadequate.

As a result, the Financial Conduct Authority on Wednesday imposed a fine of £27.8 million on the US bank, while the Prudential Regulation Authority, which carried out its own investigation, imposed a fine of £33.9 million. .

“Companies involved in trade must have effective controls in place to manage the risks involved. CGML (Citigroup Global Markets Limited) did not meet the standards we expect in this area, which resulted in today’s fine,” said Sam Woods, PRA chief executive.

While the failures relate to the period between 2018 and 2022, the most notable incident was the mis-selling of $1.4 billion in shares after a London-based trader entered incorrect figures.

According to regulators, the trader intended to sell a basket of shares worth $58 million, but entered details that instead created a basket valued at $444 billion.

Citi’s internal controls blocked $255 billion of erroneous transactions, but orders worth $189 billion were sent to a trading algorithm to execute. About $1.4 billion of the shares were sold before the trader managed to cancel the order.

The incident triggered a brief sell-off in several European markets during what would normally have been a quiet trading session on Monday morning.

Although parts of Citi’s trading controls framework worked as expected, the FCA said some primary controls were “absent or non-existent”. There was no blockage that would have prevented such a large, misguided basket of stocks from reaching the market, he said.

He added that the trader was able to manually override a pop-up alert in the trade without having to scroll down to check which alerts were flagged. Citi’s real-time monitoring was ineffective, resulting in a slow response to operations, the regulator said.

Citi agreed to settle the case and thus qualified for a discount on fines

In a statement, Citi said: “We are pleased to resolve this more than two-year-old matter, 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.”

This is not the first time Citi’s systems have been compromised by human error.

In 2020, the bank accidentally transferred $900 million of its own money to cosmetics group Revlon’s creditors, including hedge funds that refused to repay it. Although a court forced the funds to return the money, US regulators fined Citi $400 million for failing to correct deficiencies in its risk and control systems and ordered it to improve its processes and technology.

Since taking over as CEO of Citi in 2021, Jane Fraser has emphasized that improving risk and controls is a priority for the bank.

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