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Corporate Conflicts
          Sarbanes Oxley Corporate Governance Commentary

Sayanora Citigroup. Japan shuts down Private Banking Unit.

Corporate 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 laundering procedures.

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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Samples of Written Policies:

Conflicts of Interest v1
Conflicts of Interest v2
Conflicts of Interest v3

Audit Committee v1


Sarbanes-Oxley Act of 2002

Final Arthur Andersen Alumni Letter

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