Citigroup. Japan shuts down Private Banking Unit.
Conflicts of Interest
at Citigroup (C): Japanese
Financial Services Agency (FSA) has ordered Citigroup to shut down its private
banking operations in Japan. Regulators said they found a list of problems at
Citigroup's private banking arm, from improper trading practices to lax anti-money
In addition, the FSA stated Citigroup also went
beyond the scope of its banking license by brokering real estate and art deals
for its clients; activities not allowed by banks under Japanese laws. Citigroup
private bankers were also found to have misled customers about investment risk
and overcharged for some financial products.
Citigroup must cease operations
at four branches that conduct private banking in Japan. The FSA ordered the US
banking group to suspend new private banking business and gave it one year to
close all accounts at the four branches. Citigroup will have their licenses revoked
on September 30, 2005.
This setback jeopardizes Citigroup's remaining
operations in Japan. Citigroup will undoubtedly lose the trust of clients of high
net worth, who had relied on the bank. It's no wonder that Citigroup has been
running a multi-million dollar advertising campaign on financial news networks
such as CNBC focusing on their private banking services.
A global business
ethics program should also be considered to reinforce to all employees that corporate
policies must be adhered to. It would also serve notice that the actions were
of a few employees and not representative of the entire firm.
2005 Nelson Chin.
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