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UK’s FCA fines Citigroup £12.5mn for trading oversight failures

Citigroup has been fined £12.5mn by the UK Financial Regulation Authority after failing to adequately monitor and report suspicious activity in financial markets for years.

The US bank’s London-based trading arm did not properly implement the Market Abuse Regulation (MAR) trade surveillance requirements from when they were introduced by the FCA in 2016 until early 2018, according to a statement on Friday. The rules are designed to tackle potential insider trading and market manipulation.

When the bank’s shortcomings were identified, it “took 18 months to identify and assess the specific market abuse risks its business may have been exposed to,” the FCA said in a statement. “Citigroup’s flawed implementation resulted in significant gaps in its arrangements, systems and procedures.”

“By not fully implementing the new provisions when required, Citigroup Global Markets did not carry its full weight in this partnership, impacting market integrity and the overall detection of market abuse,” said Mark Steward, Executive Director of Enforcement and Market Oversight.

The penalty is the latest in a series of compliance woes for the Wall Street lender, which was fined $400mn by US regulators in October 2020 over “longstanding . . . [and] significant ongoing deficiencies” in its risk and control systems. It was placed under a consent order and had to agree to a multiyear, multibillion programme of investment and improvements.

Later that same year, a so-called fat finger error resulted in a $900mn loan being paid back to lenders of Citi’s client Revlon, with whom they were in dispute. Then in March 2020, the bank suffered a technology glitch during peak pandemic market volatility, which left it relying on the goodwill of an exchange clearing house to prevent it defaulting on margin payments for derivatives contracts.

It is not the only recent brush Citi has had with UK watchdogs. The Bank of England imposed a record £44mn fine in 2019 on the bank for persistent inaccurate reporting of its capital and liquidity levels.

To get control of the problems, chief executive Jane Fraser has budgeted $11bn for tech spending this year.

By co-operating with regulators, the bank received a 30 per cent discount, reducing the penalty from £18mn.

“Citi is pleased to put this matter behind us,” the bank said in a statement.


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