Citi Grappling with US$900m Gaffe

During an ongoing trial of US banking giant Citigroup, which has caught the world’s attention, the employees of the company revealed to a federal court that there were mistakes made in processing an interest payment which resulted in US$900 million being credited to Revlon Inc’s creditors.


The blunder was revealed during the first phase of a trial that is under way as part of the Citigroup’s efforts to recover a total of more than US$500 million it had inadvertently sent to various firms. Created from a chain of errors and ignorance on the part of Citibank’s staff, it is one of the biggest bungles ever made in the history of banking.


The error, which resulted in the wrongful transfer of a huge sum of funds to Revlon Inc has embarrassed Citigroup to a great extent. The company is now compelled to get to the bottom of this matter and explain everything to the federal court. The uncovering of this botch-up has led to Citigroup tightening its internal work structure and control checkpoints so that a slipup of this scale is not made again. 


The Citigroup case is a very high profile and crucial case for the world of finance. The Wall Street insiders are closely following the case and are divided over the potential verdict of the case. People are of the opinion that if the verdict goes in favour of the creditors, it will have the potential of exposing the lacunae in the wired transfer method followed by banks. 


The error occurred due to the failure of the “six eyes” approval system followed by Citigroup, which is an internal practice of regulating the method of wired transfer of funds through a review and approval process involving three people.


The “six eyes” process starts with an employee manually putting in payment information into Citigroup’s Flexcube loan processing program. The second person involved in the loan review process is the checker who checks the details put into the algorithm. The last step is finished by an approver who finalises the payment. 


The approver for the Revlon blunder was Citigroup’s global loan operations group senior manager, Vinny Fratta. Fratta now manages a mixed group of Citibank employees in Delaware, US, and Wipro India’s employees who work in collaboration with Citigroup to process loan payments. In his declaration to the court, Fratta said that the Flexcube system can process hundreds of payment requests in one day. In its default mode, the Flexcube will process any payment request sent unless the maker of the request overrides the option. While that option was checked for some of Revlon’s payments, it was not done for others. 


While Fratta blamed a possible technical glitch for the error initially, he soon figured out that the blunder happened due to a human error and not a technical one. 


Now Citibank has told the court that while it was acting as the administrative agent during the loan payment, it accidentally sent some of its funds to Revlon instead of making the periodic interest payment it originally planned to send.


In an effort to recover the funds, Citigroup has now sued 10 companies who manage assets for Revlon’s creditors and refuse to return the money received mistakenly. The creditors say that the money sent by Citibank is the exact amount that Revlon has owed to its creditors since 2016 and they should be allowed to keep it. The verdict of the trial has not yet been announced. 

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