Report: Citi Allegedly Broke Fed’s Intercompany Transaction Limits

Citigroup reportedly made repeated breaches of a Federal Reserve rule limiting intercompany transactions.

Those breaches led to errors in the banking giant’s internal liquidity reporting, Reuters reported Wednesday (July 31), citing an internal document from Citi.

According to the report, the Fed’s Regulation W requires banks to restrict transactions such as loans to the affiliates under their control to protect depositors whose funds are insured up to $250,000 by the government.

Reuters notes that the infractions come as regulators criticize problems with Citi’s risk management and internal controls, and with the Federal Reserve and Office of the Comptroller of the Currency (OCC) fining the bank $136 million two weeks ago for a lack of progress on compliance.

A spokesperson for Citi told PYMNTS the bank was not confirming the details of Reuters report.

The report included a statement from Citi saying the bank was “fully committed to complying with laws and regulations and have a strong Regulation W framework in place to ensure prompt identification, escalation and remediation of issues in a timely manner.”

Citi was also fined $400 million in 2020 after regulators found “ongoing deficiencies” in its handling of risk management and internal controls.

The bank’s “subsequent reaction to the breaches resulted in liquidity reporting inaccuracies,” according to the internal document at the center of the Reuters report.

In other Citi news, PYMNTS on Wednesday spoke with Debo Sen, head of payments at Citi Services, about the state of the instant/real-time payment space for the series, “What’s Next in Payments: The Halftime Report.”

She highlighted the rapid adoption of these new payment rails in regions such as Asia-Pacific (APAC) and Latin America, with India and Brazil leading the way. In India, about 85% of all payments are now real time, due to the Unified Payments Interface (UPI) system, a sign of the country’s advances in digital payments infrastructure.

Brazil is a close second, with nearly 80% adoption. However, this trend is not limited to emerging markets, Sen added, noting that the U.S. and the European Union are also putting forth regulations and building infrastructure to support real-time payments.

“The interesting thing is there is always a lot of conversation as to whether instant payments will cannibalize other methods of payment — but in fact, it is digitizing cash in those economies and eliminating cash in many cases,” Sen told PYMNTS.