PRA slaps £44m fine on Citigroup’s UK operations for failings in regulatory reporting governance

Maria Nikolova

Citi failed to ensure that systems and controls supporting its UK regulatory reporting framework were designed, implemented and operating effectively.

The UK Prudential Regulation Authority (PRA) today announces the imposition of a fine of £44 million on Citigroup Global Markets Limited, Citibank N.A. London branch and Citibank Europe Plc UK branch. The penalty stems from Citi’s failings in relation to its internal controls and governance arrangements underpinning compliance with PRA regulatory reporting requirements.

On numerous occasions from June 19, 2014 to December 31, 2018, the firms’ UK regulatory reporting framework was not implemented or operating effectively. This led to the firms’ failure to submit complete and accurate regulatory returns to the PRA. The failings persisted over a significant length of time and were serious and widespread in nature. They resulted in significant errors in the firms’ returns, including six substantive matters which had a material or potentially material impact on the returns. This meant the returns submitted were unreliable and did not provide the PRA with an accurate picture of CGML’s capital or liquidity position.

The PRA’s investigation determined that, although during the period under investigation Citi had begun to undertake a significant remediation program to address data quality issues, the internal controls and governance arrangements which underpinned Citi’s UK regulatory reporting were not in a number of respects designed, implemented or operating effectively. They were therefore inadequate to ensure accurate regulatory reporting for an organisation of Citi’s size. This led to the significant number of errors and misstatements identified in Citi’s returns.

In particular, Citi failed to ensure that systems and controls supporting its UK regulatory reporting framework were designed, implemented and operating effectively. It failed to allocate adequate human resources to ensure that CGML’s liquidity returns were complete and accurate. Further, Citi’s documentation of multiple aspects of its UK regulatory reporting control framework was inadequate given its size, complexity and systemic importance.

CGML’s approach to technical interpretations of reporting requirements was insufficiently robust given the complexity of those decisions and the impact they could have on the accuracy of the returns.

According to the PRA, Citi’s oversight and governance in relation to regulatory reporting failed to meet the standards expected of a systemically important institution.

As a result, Citi breached relevant requirements under the PRA Rulebook. Specifically, CGML and CBNA London breached Fundamental Rule 6 of the PRA Rulebook. CBNA London and CEP UK also breached the Branch Return Rule and all three firms breached Rule 6.1 of the Notifications Part of the PRA Rulebook.

Citi agreed to resolve this matter and thus qualified for a 30% reduction in the fine imposed by the PRA. Without this discount, the fine imposed by the PRA would have been £62.7 million.

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