- Citi to pay $10.5mn for books and records violations and inadequate controls.
- Actions on books and records, internal accounting controls, trader supervision.
- From $81mn losses, due to trader mismarking and unauthorized prop trading.
- With $475mn of losses, due to fraudulently-loans made by Mexican subsidiary.
Books and Records on Trading
- Citigroup Inc. and US broker-dealer subsidiary Citigroup Global Markets (CGMI).
- $5.75mn penalty for inaccurate books and records and supervision of its traders.
- From 2013-16, three CGMI traders mismarked illiquid positions in prop accounts
they managed, in two cases covering losses on widespread unauthorized trades.
- Discovery of mismarking led to termination of the traders, and $81mn in losses.
- CGMI failed to detect misconduct due to its inadequate supervisory procedures.
- Included lack of independently verify the valuations of the mismarked positions.
Accounting Controls on Loans
- Citigroup $4.75mn penalty for failing to devise and maintain accounting controls.
- Subsidiary Grupo Financiero Banamex S.A. de C.V. loaned $3.3bn to Oceanografia.
- Based on invoices and work estimates for services to Petroleos Mexicanos (Pemex).
- Many work estimates were fraudulent and did not reflect amounts Pemex owed it.
- Citigroup ultimately lost approximately $475mn as a result of Oceanografia fraud.
- Banamex and Citi lacked the controls to verify the invoices before making of loans.
- They ignored numerous red flags, which should have led to discovery of the fraud.