Citigroup: A $893 Million Risks

Citigroup had made an enormous mistake by erroneously transferring $893 million in August 2020 while trying to make an interest payment of $7.8 million to Revlon’s creditors. Some of the creditors were willing to return the money in a total of $392 million when Citigroup, as Revlon’s loan agent, notified that they had made an error. However, the other ten lenders have refused to return the money as they believed the transfer was intentional, which the amount is an exact match with the principal plus all interest outstanding. The loan issued in 2016 is due in 2023.

Citigroup, therefore, brought the case into the court when trying to reclaim the remaining totaling of $501 million. Eventually, the court said that the transfers were final and complete transactions, not subject to revocation, although they acknowledged the transfer as an error.

Two months after the transfer error, Citigroup was fined $400 million by U.S. regulators due to several long-standing deficiencies. One of the associated issues is the failure of enterprise-wide risk management that includes compliance risk management programs. Following the fine, the company would invest $1 billion in their operational systems where risk management was included.

References:

Schroder, P. (2020, October 8). Citigroup fined $400 million by regulators, agrees to fix ‘longstanding deficiencies’. Retrieved from Reuters: https://www.reuters.com/article/usa-citigroup-enforcement-idUSKBN26T0BL

Stempel, J. (2021, February 16). Citigroup cannot recoup Revlon payouts after nearly $900 million gaffe: U.S. judge. Retrieved from Reuters: https://www.reuters.com/article/us-citigroup-revlon-lawsuit-idUSKBN2AG1TJ