For all Citigroup's perceived flaws in the Chuck Prince era, the company seemed to make steady and visible progress under the lawyer's watchful eye in terms of its internal controls and its relationship with the myriad regulators who oversee its far-flung operations. In the past week, however, there have been signs of slippage — with one instance bearing more than a passing resemblance to difficulties it faced before Prince's governmental-relations repair work.

The blog Housing Wire last week reported that Citigroup had put its correspondent lending division's activities on hold while it investigated breaches in "quality control." Translation: Citi was funding loans made by independent mortgage brokers who, as late as last week, were still not bothering to verify appraisal or income information they were getting from applicants.

Citi's recent censure in Japan is perhaps even more telling. Japanese regulators announced Friday that they would ban Citi from advertising its retail financial products for a month because the bank had not been properly monitoring or eliminating "suspicious activity," including money laundering. Japan's Financial Services Authority said that Citi's Japanese unit had not "accurately identified a series of problems that were recently found" and that "the effectiveness of the internal audit has not been ensured." Remember that this is the same body that shuttered Citi's private bank in Japan for a very similar set of violations. That episode that culminated a bow of apology delivered personally and publicly by Prince in 2004.

The U.S. regulator for money laundering, the Treasury Department's Financial Crimes Enforcement Network, has engaged in enforcement actions against several banks in recent years over failures to adequately handle suspicious activity reports or otherwise maintain a good internal auditing system to catch financial crimes. But it's been nearly two years since FinCEN has cited a U.S.-based bank. A spokesman for the agency would not say whether Japan's FSA's move would prompt any additional monitoring of Citi in the U.S.

Current CEO Vikram Pandit has tried to maintain Citi's image as a functioning global bank, and as an institution that is on track to regain its independence from the government and re-cast itself as a top competitor in markets around the world. So the timing of these missteps is especially problematic. Because the last thing Citi needs now is evidence that its operational house is not in order.