Compliance

Citi Temporarily Banned From Adding Clients In Indonesia Amid Fraud Probe

Tom Burroughes, Group Editor, 7 April 2011

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Citigroup has been temporarily banned from adding wealth management clients in Indonesia due to a probe by that country into fraud allegations, media reports said.

The issue relates to the firm's Citigold business, rather than the private bank that deals with ultra high net worth clients, reports said.

Bank Indonesia, the central bank, has questioned Citigroup’s executives including the company’s head because of problems with internal controls, Darmin Nasution, the governor, told lawmakers in a hearing in parliament, reports said. He said regulatory authorities are also reviewing debt collection practices at the bank.

This is not the first time Citi has fallen afoul of Asian regulators. In 2004, the private bank of the US banking giant was ordered to cease operations in Japan due to regulatory shortcomings.

In a statement emailed to this publication, Citi said: "We are seeking clarification on the comments made but of course we will comply with whatever our regulator requires. We understand it was said to be a temporary measure, and has no impact on the services we offer our existing Citigold customers. Our focus is on cooperating fully with all authorities to bring the investigation to a conclusion and resolve the matter." 

In the Indonesia case, a local relationship manager allegedly stole R16.1 billion (around $1.9 million) from three clients in 2009 and 2010 by using blank forms signed by the customers, National Police Director for Economy and Special Crime Arief Sulistyanto were quoted by Bloomberg as saying in a statement. The bank filed a case against the employee on 14 March, he said.

“We have sent a letter to ask the bank to settle the problems without causing further losses to customers, to improve the internal controls and temporarily halt accepting new Citigold customers,” Nasution said.

The ban against seeking new clients has been in effect since 16 March, Bank Indonesia deputy governor Halim Alamsyah said at the hearing, reports said.

Citigroup has called customers that may be affected by the alleged fraud and will return the stolen money, Shariq Mukhtar, Citigroup’s Indonesia country head, said at a hearing on 5 April, reports said.

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