Citi Fined $79 Mn By UK Regulators Over 'Fat-finger' Failures

UK regulators fined Citigroup (C.N), USD 78.5 million for controls failings in its trading operations, one of the biggest sanctions for systems breaches, which in one case saw the Wall Street firm cause a sudden fall in European stocks.

The Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA), the markets watchdog, both probed and fined Citigroup over the failings that spanned from April 2018 through May 2022, they said in a statement on Wednesday outlining the findings of the investigation.

The bank's London unit, Citigroup Global Markets Limited (CGML), had a series of failings that "crystallised into trading incidents", the most striking of which was a mistaken $444 billion order in May 2022.

"Firms involved in trading must have effective controls in place in order to manage the risks involved," said Sam Woods, CEO of the PRA and the Bank of England's deputy governor for prudential regulation. "CGML failed to meet the standards we expect in this area, resulting in today’s fine.

Citi on 2 May 2022 processed the USD 444 billion order that was meant to amount to just USD 58 million, prompting USD 1.4 billion in mistaken sell orders, according to the regulators' findings. The PRA said the immediate cause of the trading error was a trader's mistake, known as a "fat-finger" error, but "primary control failings" resulted in Citi's electronic trading system generating erroneous orders.

The regulator said that the mistake coincided "with a material short term movement" in several European indices before the trade was cancelled.

"In particular the absence of certain preventative hard blocks and the inappropriate calibration of other controls" were behind the blunder, it said.

Citi had received "repeated supervisory communication" from the PRA to improve but weaknesses persisted and Citi's own systems had also identified problems while a series of incidents highlighted deficiencies, the regulator said.

A Citi spokesperson said the bank was “pleased to resolve this matter from more than two years ago, which arose from an individual error that was identified and corrected within minutes.”

"We immediately took steps to strengthen our systems and controls, and remain committed to ensuring full regulatory compliance," the spokesperson said via email.