Why the Fed Fined Citibank $400 Million for "Longstanding Deficiencies"
The Federal Reserve fined Citigroup $400 million over failing to correct previously identified faults. Here's more about this slap on the wrist.
Oct. 8 2020, Updated 12:50 p.m. ET
On Oct. 7, U.S. regulators fined Citigroup Inc. a total of $400 million for failing to correct what the Federal Reserve refers to as "several longstanding deficiencies." The enforcement order calls Citigroup out for its lack of risk management, internal controls, and data governance. The Federal Reserve has previously ordered Citigroup to change these tactics, and the Office of the Comptroller of the Currency (OCC) fine is a result of failure to comply.
What to know about the Citi consent order
Citigroup (which includes Citibank) has been a target of regulators in the U.S. and U.K. for quite some time. Most recently, Citibank accidentally sent $900 million to a number of businesses, all of whom loaned money to Revlon Inc. The blunder happened in August and highlighted existing systemic faults within Citigroup Inc.
Now, the Federal Reserve has come forward with an enforcement action against the corporation. Meanwhile, the OCC is charging a civil money penalty amounting to $400 million as a related fine. The money will go to the U.S. Treasury.
The Citi OCC fine of $400 million isn't the only weight on Citigroup's shoulder. The OCC also issued a cease and desist order. This not only requires the company to immediately correct risk management, data governance, and internal controls, but it also requires Citigroup to seek OCC non-objection before proceeding with any mergers.
If changes don't come swiftly, the OCC says it will institute more restrictions on the corporation and enforce changes in executive management.
In a response, Citigroup says they're planning to invest $1 billion in the overhaul. Meanwhile, CEO Michael Corbat is eager to retire, but regulator actions are slowing the process down.
QAnon and Citi have a connection—to Citi's dismay
While Citigroup is dealing with an overhaul of security and data management, Citibank is dealing with a whole separate issue. On Oct. 7, Citibank fired the Senior Vice President of Technology, Jason Gelinas, for a side job that didn't fit the bill.
Gelinas ran a website dedicated to the debunked QAnon conspiracy theory, which is largely backed by fringe Trump supporters. The site was called QMap.pub. He was originally put on paid leave in Sept., but the company has since terminated his employment. Citigroup states their code of conduct as reasoning for the termination, which requires employees to get approval for external business ventures.
Jason Gelinas' net worth as a former Wall Street executive living in suburban New Jersey is unknown, but he was bringing in $3,000 per month on Patreon for the QAnon website alone.
What is Citigroup stock price today?
Citigroup Inc., which goes by the ticker symbol "C" on the NYSE, is experiencing bearish volatility. The correction began on Oct. 6 at about 2:30 p.m. with a slight increase by market open on Oct. 7.
On Oct. 8, Citigroup stock is breaking even with strong swings. At market open, Citi was trading at $44.78 per share. After double-digit fluctuations by mid-morning, the stock saw a slight increase at $44.85.
