Citigroup Inc. is grappling with significant regulatory challenges as the bank faces scrutiny from the Federal Reserve and the Office of the Comptroller of the Currency (OCC). The Federal Reserve issued three Notices Requiring Immediate Attention (MRIAs) last year, urging Citigroup to improve its assessment of default risk in derivative transactions. This follows internal audits that revealed substantial shortcomings in risk management and reporting to senior management [f0da2c07].
In response to these ongoing issues, Citigroup has approximately 13,000 employees dedicated to overhauling controls and systems, part of a larger workforce of 229,000. However, the bank struggles with training in critical areas such as risk, compliance, and data roles, which has contributed to its regulatory woes. CEO Jane Fraser initiated a simplification effort in September 2023, leading to layoffs that affected staff involved in regulatory compliance [f2a0bfda].
The bank has been under two consent orders since 2020, following a $900 million error in sending funds to Revlon. Despite investing billions in transformation efforts to address these issues, the Federal Reserve and OCC have reprimanded Citigroup for insufficient progress. Recent analyses highlight a pressing need for improved skills in compliance risk management and data governance among its workforce [f2a0bfda].
In a related development, Wells Fargo & Co is also facing pressure to strengthen its money laundering detection and compliance with international sanctions. The OCC mandated improvements on September 13, 2024, leading to a notable decline in Wells Fargo's shares. Although the agreement does not impose monetary penalties, the bank has committed to addressing the required corrective actions promptly [0ed74201].
A secret report from the OCC revealed that 11 out of 22 examined banks in the US, including both Wells Fargo and Citigroup, have inadequate safeguards against operational risks, particularly in cybersecurity and employee errors. This highlights the broader challenges within the banking sector as it navigates rising operational risks and the potential for a financial crisis [f0da2c07].