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Japan clamps Citigroup operations

Tokyo, June 27, 2009

Citigroup has been ordered by Japanese regulators to stop marketing financial products at its retail bank for a month, a slap that is unlikely to squeeze revenue but will further tarnish the US bank's reputation in a key market.

The Financial Services Agency said Citi had not developed adequate systems to detect suspicious transactions such as money laundering, the same violation that prompted the regulator to shut down Citigroup's private banking business in 2004.

The latest punishment comes amid the collapse of the US bank's push to be a major player in Japan. Citigroup spent about $16 billion in recent years to buy broker Nikko Cordial, which it agreed to sell last month at less than half that price.

"If Citibank cannot get its house in order, its operations in Japan may come under threat," Neil Katkov, head of Asia research for financial services consultancy Celent, was quoted as saying in our sister publication, the Gulf Daily News.

"We've seen banks in the US shut down for alleged loose money laundering compliance, and this is a sign that Japanese regulators are getting tougher."

Citigroup, which has 35 branches and generates about $2 billion in annual revenue from its retail and corporate banking division. Citibank Japan apologised for the breach, saying it stemmed from the way it reported suspicious transactions.

Its head of retail banking in Japan, Darren Buckley, made a public bow of apology, the traditional sign of remorse employed by Japanese executives, repeating the gesture made by Citi's then-chief executive Charles Prince five years ago.

"Our controls need strengthening," Buckley said. – TradeArabia News Service




Tags: Citigroup | Japan | Citibank | Tokyo | Celent |

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