Chris Nicholson
Japanese regulators ordered Citigroup recently to suspend advertising and other promotional activities in its retail banking division in Japan for a month for compliance violations and for failing to monitor suspicious transactions.
The regulator, the Financial Services Authority, said Citigroup?s Japanese unit, Citibank Japan, had failed ?to make notification of suspicious transactions, including money laundering.? It cited fundamental problems with the bank?s compliance and governance system.
?CJL has not accurately identified a series of problems that were recently found,? the agency added, ?and the effectiveness of the internal audit has not been ensured.? The suspension, which is to begin July 15, means that the bank will be prohibited from advertising, soliciting customers or using publicity in relation to its retail banking products.
Citigroup issued an apology and said that ?this suspension does not restrict any activities with customers who wish to enter into a transaction with Citibank Japan. Nor does it affect in any way Citibank Japan?s ability to serve its corporate banking division clients.?
The financial regulator had issued a warning to Citibank Japan in 2004, suspending certain operations for a year. The business improvement plan that followed has not been adopted well, the agency concluded.
Citibank Japan has not updated a database used to screen suspicious transactions in five years, the regulators said, and managers ?lack an understanding of the rules applied in Japan, such as laws and regulations, and an awareness of improvement.?
Citigroup said it would comply with the regulator?s order and would submit an improvement plan by July 31. ?We apologise and take the situation seriously,? the company said in its statement.
According to its website, Citibank Japan operates in 35 locations in the country, and has $3.1 billion in net assets.
The bank made a loan to a client who was subsequently prosecuted for stock price manipulation with the money lent. It promoted dealings with a person who had been reported to Citibank Japan for suspicious transactions.
Citigroup, which received about $45 billion in bailout money from the US government, is in the process of selling many of its units in Japan after a campaign to strengthen its position . Citigroup has said it intends to retain its consumer banking in Japan.