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Here's Why Citibank has Been Pulled up for its Failure to Protect Customers From Scams

The lawsuit aims to make the bank reimburse losses, pay penalties, and eomploy anti-fraud defenses.
Cover Image Source: A sign is posted in front of a Citibank branch office | Getty Images | Photo by Justin Sullivan
Cover Image Source: A sign is posted in front of a Citibank branch office | Getty Images | Photo by Justin Sullivan

Citibank has been accused of failing to protect victims of scams and refusing to reimburse its customers who lost millions of dollars and in some cases, their entire life savings due to Citi’s weak security. The lawsuit filed in the US District Court for the Southern District of New York alleges that the big bank “overpromised and underdelivered on security” and failed to respond to red flags.


The Office of the Attorney General (OAG) alleges that Citibank did not implement strong online protections to stop unauthorized account takeovers, and it misleads account holders about their rights after their accounts are hacked and funds are stolen. The suit further alleges that the bank illegally denied reimbursement to victims of fraud as well.


It claims that the bank failed to respond to fraudulent activity appropriately and quickly. Due to the bank’s lax security, customers in New York have lost millions of dollars and Attorney General James is seeking to hold the bank accountable for failing to protect its customers and wants to make the bank pay the defrauded New Yorkers with interest. It also aims to make the bank pay penalties, and adopt enhanced anti-fraud defenses to prevent scammers from stealing in the future.

One such case was that of a customer who lost $40,000 to fraud in 2021 after clicking a link on a scammer’s message but did not take further action or provide any banking information. The customer even called the local branch to report the suspicious activity. In response to this, Citi’s representatives told the customer not to worry about it. However, three days later, the customer found out that the scammers had changed her banking password. The scammers had also made wire transfers of $70,000 from her savings account to her checking account. They then electronically transferred $40,000 from her account to unknown accounts. As per the AG’s release, none of this was consistent with the customer's past activity, and the transactions were not verified. Further, the customer tried to contact the bank for weeks. She submitted several affidavits but her fraud claim was ultimately denied by the bank.

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

In a statement provided to Ars Technica, Citibank claimed to closely follow all laws and regulations related to wire transfers. It said that the bank works extremely hard to prevent threats to customers and to assist customers in recovering losses when possible. As for the reimbursement to customers, the bank said it is not required to reimburse clients when they “follow the criminals’ instructions” as the bank cannot see any indication of fraud if the customers willingly execute the instructions.

Citibank is obligated to provide reimbursement under the Electronic Fund Transfer Act (EFTA). The law helps customers who promptly alert the banks to unauthorized activity, by minimizing losses and requires the bank to reimburse stolen funds. Thus, the suit claims that under the EFTA, Citi's electronic debits of consumers' accounts are unauthorized and the bank must reimburse all debited amounts.


The lawsuit further seeks a permanent injunction against Citibank, an accounting of customer losses over the last six years, payment of restitution and damages to the victims, and civil penalties.