Citibank Japan reprimanded by regulators

Japan's Financial Services Agency (FSA) has issued an administration action letter against Citibank Japan for "fundamental problems" with its internal controls regarding money laundering and protecting the bank against organised crime. The letter, issued Friday, suspends "all sales operations pertaining to all products handled by the retail banking division" for the period ranging from July 15 to August 14 this year. Citibank Japan's wholesale banking operations in Japan are unaffected.

The action represents the third such reprimand for Citibank in Japan over the past decade, making it the most censured foreign bank in Japan when including the revocation of its private banking license in 2004. Behind Citi, Credit Suisse had its private banking license pulled in 1999, and received a reprimand regarding missing order tickets at its asset management business in 2006. What was then Credit Suisse First Boston also received a reprimand in 2002 regarding short selling.

The latest FSA statement emphasises that the problems were highlighted in a former administrative action letter in 2004 but have still not been resolved. The 2004 reprimand was itself partly a follow-up of a 2001 reprimand, which stated that Citi "needs a fundamental restructuring of its procedure of operations and management; ensuring the senior management to commit to the improvement plan and improving legal and compliance function, etcetera (pursuant to Article 26-1 of the Banking Law)". Article 26-1 was the same article invoked on Friday.