The lifting of a decade-old consent order is a step in the right direction for Citigroup, but the New York megabank still has much work to do to satisfy regulators, according to analysts.
At the top of the pile: addressing deficiencies in risk management and internal control systems that were the basis of two additional consent orders against Citi in the fall of 2020.
Citi CEO Jane Fraser told employees in a recent memo that the bank is now freed from an April 2012 consent order issued by the Office of the Comptroller of the Currency, which had identified problems with Citi’s anti-money-laundering controls and its Bank Secrecy Act compliance.
While being released from the order “signals that Citi has made some progress internally on regulatory issues,” it isn’t enough to say for sure that the $2.4 trillion-asset company will ultimately succeed in addressing the two more recent orders, Piper Sandler analyst Jeff Harte said.
“I think the temptation is to say that they’re doing well, but we don’t know if they’re doing well” on the 2020 consent orders, Harte said last week in an interview. “But it does imply that at least some progress is being made with the OCC, and good news is better than bad news.”
The OCC confirmed that the consent order was terminated on April 22, but an agency spokesperson declined to comment on the other enforcement actions against Citi.
For years Citi has been contending with a variety of regulatory issues, including compliance problems in the anti-money-laundering realm. In 2015, federal regulators and California officials
Citi later shut down Banamex USA, which was a key conduit for remittances between the United States and Mexico. Then in 2017, Citi
In its 2012 consent order with the OCC, Citi was faulted for failing to implement an anti-money laundering compliance program that had adequate internal controls and effective independent testing. The OCC also accused Citi of not conducting adequate due diligence on foreign correspondent bank clients and not filing certain suspicious activity reports in a timely manner.
At the time, Citi said that it had taken “significant steps and developed a comprehensive plan” to better manage anti-money-laundering risks and to resolve what it described as “legacy” issues.
But Citi later paid a
The latest dustup with regulators came in October 2020, when the Federal Reserve and the OCC slapped Citi with a
The enforcement actions came about two months after Citi
Citi, which submitted risk management remediation plans to the Fed and the OCC last fall, is now incorporating the agencies’ feedback into its overhaul, Fraser told analysts this month during the company’s
“This will be a multiyear program, but it’s one that we are now firmly down the execution path on,” Fraser said. “It’s got attention from the whole management team, and our board is constantly challenging us to make sure that we’re making the progress that should be expected.”
One year after CEO Jane Fraser launched a business revamp, Citigroup reported lower revenue, higher expenses and a big reserve for loan losses in Russia. Yet the company’s long-term plan to streamline operations and invest in high-performing businesses — all with an aim to strengthen shareholder returns — still appears on track.
Still, Citi faces a heavy lift in resolving the two-year-old consent orders, analysts at Autonomous Research noted in a newsletter.
They called the OCC’s action last month “a positive incremental sign for Citi” but added that “the bank still has significant work ahead of it to complete the just-started work on the 2020 consent orders.”
The Autonomous analysts also wrote that the remaining work will likely “absorb a fair amount of expense and management time from Citi over the next few years.”
Now that the 2012 consent order has been lifted, the danger for Citi is in reverting to business as usual, said Ross Delston, an attorney who specializes in anti-money-laundering work.
“The challenge for Citibank, after 10 years of operating under the OCC’s consent order, is to maintain the level of compliance that the bank put in place in response to the order,” he said.
Kevin Wack contributed to this report.
