On Tuesday, New York Attorney General Letitia James filed a lawsuit against Citibank, accusing the bank of failing to protect and reimburse victims of electronic fraud.
The lawsuit asserts that Citibank lacks adequate safeguards to prevent unauthorized account takeovers, misleads fraud victims, and unlawfully denies reimbursements, according to a press release.
The attorney general’s office stated that these alleged failures have resulted in significant financial losses for New York account holders, with some losing their entire life savings.
“Banks are supposed to be the safest place to keep money, yet Citi’s negligence has allowed scammers to steal millions of dollars from hardworking people,” James stated.
“Many New Yorkers depend on online banking for bill payments or saving for significant milestones, and if a bank fails to secure its customers’ accounts, it is not fulfilling its most fundamental duty.”
Citigroup, the parent company of Citibank, has faced challenges related to risk management and controls in the past.
Former executives have indicated that the bank, formed through decades of mergers, has a fragmented technology system due to underinvestment in its infrastructure.
This issue became apparent when Citigroup mistakenly sent nearly $900 million to Revlon’s lenders in 2020.
Later that same year, banking regulators imposed a $400 million fine on Citigroup and mandated improvements to its risk management systems.
Since assuming the role in 2021, CEO Jane Fraser has focused on enhancing the bank’s technology and satisfying regulatory requirements.
The New York lawsuit includes specific individuals who reported having thousands of dollars stolen from their accounts and stated that the bank did not reimburse them.
In response, Citi stated that the bank “works extremely hard” to mitigate threats and support customers who fall victim to fraud.
“Banks are not obligated to fully compensate customers who follow criminals’ instructions when there is no indication that the customers are being deceived.
However, in light of the industry-wide increase in wire fraud over recent years, we have implemented proactive measures to protect our clients’ accounts through advanced security protocols, intuitive fraud prevention tools, and by providing clear information about the latest scams to raise client awareness and education,” the company said in a statement.
“Our efforts have significantly decreased client wire fraud losses, and we remain dedicated to investing in fraud prevention measures to help our clients secure their accounts against emerging threats.”
James contended in the lawsuit that Citibank is required to reimburse fraud victims under the Electronic Fund Transfer Act.
