Agency slaps Citibank Japan with sales suspension

[June 26, 2009]  TOKYO (AP) -- Authorities ordered Citibank's Japan unit to suspend all sales operations at its retail banking arm for one month after it failed to improve anti-money laundering measures that target crime syndicates and other shadowy groups.

The order Friday is the second time in five years that the Financial Services Agency has reprimanded Citibank Japan Ltd. for insufficient monitoring and control of "suspicious transactions."

The suspension comes as the Japan lender's parent company Citigroup -- one of the banks hardest hit by the financial crisis -- scales back its presence in the world's second-biggest economy.

Last month it agreed to sell its Japanese brokerage businesses to Sumitomo Mitsui Financial Group, Japan's third-largest bank, for about 545 billion yen ($5.7 billion).

Citibank, a relatively small player in Japan's consumer banking market, will shut all sales operations at its Japanese retail division from July 15 to Aug. 14. The suspension covers advertising, sales campaigns and solicitation but does not restrict customers seeking a transaction with the bank.

It also does not affect the bank's corporate division.

The FSA said Citibank had made unsatisfactory progress since its first order to improve anti-laundering measures in September 2004. It cited inadequate procedures to handle possible transactions by crime syndicates and other "antisocial" groups.

"Despite the fact that the board of directors and management ... were responsible for the execution of the business improvement order, they lack an understanding of the rules applied in Japan, such as laws and regulations, and an awareness of improvement," the FSA said in a statement.

The bank apologized to customers after the order.

"Citibank Japan is committed to implement all necessary measures to prevent any future occurrence of the problems identified," it said.

Citibank said it will submit a business improvement plan to the FSA by July 31 and vowed to "clarify responsibility for this matter and take appropriate disciplinary action."

Citibank Japan operates 35 locations as well as two Internet-only branches. As of March 31, it had 299.3 billion yen in net assets and 1,548 employees.

[Associated Press; By TOMOKO A. HOSAKA]

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