New York Attorney General Letitia James filed a lawsuit against Citibank on Tuesday, alleging that the bank failed to protect its customers from fraud and refused to reimburse victims who collectively lost millions of dollars.
Lawsuit Accuses Citibank of Violating State Consumer Protection Laws
The lawsuit, filed in state court in Manhattan, accuses Citibank of violating New York state consumer protection laws by not adopting “proper security measures” to prevent fraudulent transfers and by having “unreasonable” requirements for fraud victims seeking reimbursement.
Specifically, the lawsuit states that Citibank failed to monitor accounts for fraudulent activity, notify customers of suspicious transactions, and reimburse customers in a timely manner. It alleges that these failures allowed hackers and scammers to steal money from accounts undetected and make victims jump through hoops to get their money back.
“Citibank utterly failed to adopt appropriate security measures to protect its customers’ accounts from fraudulent transactions,” said Attorney General James in a statement. “Far too often, Citibank refused to reimburse clients who had large sums of money stolen from their accounts as a result of fraudulent conduct.”
AG Seeking Restitution for Victims, Stricter Security Protocols
James said that there have been hundreds of complaints against Citibank related to account fraud over the past three years. Her office opened an investigation into the bank’s practices last year.
The lawsuit is seeking restitution for victims who have not been fully reimbursed. It also aims to force Citibank to change its security protocols, including implementing “proper safeguards” for account monitoring, notifying customers promptly of suspicious activity, and streamlining the reimbursement process.
Furthermore, the suit seeks to compel Citibank to conduct regular risk assessments to identify points of weakness in its fraud prevention policies and take corrective action.
Citibank Accused of Failing Victims Like 82-Year-Old Widow
To illustrate Citibank’s alleged shortcomings, James highlighted the story of an 82-year-old Citibank customer living on a fixed income. Last February, scammers allegedly stole more than $1 million from her account through fraudulent wire transfers.
The woman reported the fraud to Citibank immediately, James said, but they refused to reimburse her because they claimed she had not notified them in time. After months of struggling, the woman only received a fraction of her money back.
“It is completely unacceptable that one of the largest banks in the world continues taking money from the pockets of innocent people,” said the attorney general.
| Amount Stolen From Customer’s Account | $1 million+ |
|---|---|
| Amount Citibank Reimbursed | Fraction of total |
| Time Taken For Partial Reimbursement | Months |
This case appears to be an egregious but not isolated example of Citibank’s failure to honor fraud reimbursement requests in a timely manner, prompting the lawsuit.
Citibank Denies Wrongdoing, Vows to Defend Itself
In response to the lawsuit, a Citibank spokesperson denied any wrongdoing and vowed to defend the company.
“We take the protection of our clients’ assets with utmost seriousness and have robust controls in place to detect fraud and reimburse clients,” the spokesperson said.
Citibank said it put other security layers in place as fraud patterns evolve but did not elaborate further. The bank insisted that the vast majority of claims for unauthorized activity are resolved “efficiently and fairly.”
Financial Watchdogs Have Previously Cited Citibank on Security Issues
This is not the first time Citibank has come under fire for its fraud prevention and response policies.
In 2020, the Office of the Comptroller of Currency ordered the bank to improve its risk management processes after a review found that its methods for identifying suspicious account activity had “significant shortcomings.”
And over the past decade, Citibank has paid hundreds of millions in fines related to deficiencies in its anti-money laundering protocols and Bank Secrecy Act violations.
The new lawsuit from New York indicates that the banking giant may still have more work to do in shoring up account protections.
What Happens Next
With New York’s lawsuit now filed, Citibank has 30 days to formally respond in court after being served the summons.
It remains to be seen whether a settlement can be reached or if this case will go to trial. If no settlement is reached quickly, we can expect a prolonged legal battle ahead.
This litigation comes on the heels of several other lawsuits James has filed against major banks, including Wells Fargo and Bank of America. Her office will likely continue ramping up pressure on financial institutions to bolster consumer protections or else face consequences.
In the meantime, customers concerned about fraud affecting their Citibank accounts may want to take additional precautions like instituting withdrawal limits or avoiding large online transfers. Any questionable transactions should be reported immediately, both to the bank and authorities if necessary.
This story is still developing and more details are likely to emerge in coming days and weeks as Citibank prepares its defense. But New York’s lawsuit signals that the AG is ready to crack down hard on banks that don’t make safeguarding user accounts a top priority.
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