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New York State Sues Citibank Over Account Transfer Fraud

According to the lawsuit, Citi must reimburse victims of fraud under the Electronic Fund Transfer Act.
Cover Image Source: The Citibank logo | Photo by Michael M. Santiago | Getty Images
Cover Image Source: The Citibank logo | Photo by Michael M. Santiago | Getty Images

Amidst a surge in finance scams, New York Attorney General Letitia James has filed a lawsuit against Citibank, accusing the institution of failing to protect account holders from online fraud and to reimburse customers in the state for substantial losses. The lawsuit alleges that Citibank lacks strong safeguards against unauthorized account takeovers, misguides customers about their rights following account breaches and theft, and wrongfully denies reimbursements to defrauded individuals. 

Image Soup: Photo by John Smith | VIEWpress |Getty Images
Image Source: Photo by John Smith | VIEWpress | Getty Images

James asserts that the bank's inadequate security measures resulted in customers from New York losing millions of dollars to scammers and hackers. Some customers reportedly lost their entire life savings due to the perceived lack of security by the bank. The lawsuit, filed in a US District Court in New York, alleges that Citibank failed to fulfill promises made regarding security measures and did not appropriately respond to warning signs indicative of potential fraud. The legal action seeks to hold the bank accountable for what is claimed to be negligence in safeguarding its customers' financial interests.

The lawsuit cites specific examples of customers who suffered significant financial losses due to scams. In one case, a customer lost $40,000 from her retirement savings after falling victim to a text message scam that impersonated Citibank. Despite her efforts to report the fraud, the bank denied her claim for reimbursement. In another instance, a customer lost $35,000 to a scammer who changed her passwords and attempted wire transfers without proper verification from the bank. 

A sign is displayed on the exterior of a Citibank branch office | Getty Images | Photo by Justin Sullivan
Image Source: A Citibank branch office | Getty Images | Photo by Justin Sullivan

In response to the allegations, Citibank stated that it follows wire transfer laws and works hard to prevent threats to its clients' accounts. However, the bank argues that it is not obligated to fully reimburse clients who follow instructions from scammers without any indication of deception. Besides the fraud-related allegations, federal regulators previously accused Citibank of discriminating against Armenian-Americans in credit card applications based on their last names. This accusation raises concerns about the bank's practices regarding fair treatment of customers as a whole.

Image Source: CEO of Citigroup Jane Fraser | Photo by Alex Wong | Getty Images
Image Source: CEO of Citigroup Jane Fraser | Photo by Alex Wong | Getty Images

"Given the industry-wide surge in wire fraud during the last several years, we’ve taken proactive steps to safeguard our clients’ accounts with leading security protocols, intuitive fraud prevention tools, clear insights about the latest scams, and driving client awareness and education," Citibank said in a statement. "Our actions have reduced client wire fraud losses significantly, and we remain committed to investing in fraud prevention measures to help our clients secure their accounts against emerging threats."