Citigroup challenges New York lawsuit over fraud scams: Report
The Citigroup Inc (Citi) logo is seen at the SIBOS banking and financial conference in Toronto
Citigroup, one of the major players in the US banking sector, is pushing back against a lawsuit brought by New York Attorney General Letitia James, who accuses its Citibank unit of neglecting to reimburse customers who have fallen prey to online scammers.
According to a report by Reuters, Citigroup argued that the lawsuit is "misguided" and should be dismissed, citing specific legal standards and industry practices.
Responding to the lawsuit, Citigroup said that it was faithful towards combating online wire fraud while questioning the legal grounds of the case.
Reuters reported that Citigroup contended the lawsuit is based on a misinterpretation of federal laws governing electronic fund transfers, which explicitly excluded wire transfers from liability.
The bank argued that it adheres to the Uniform Commercial Code, a standard adopted across all US states, which clears banks from reimbursing losses if they have implemented commercially reasonable security measures to verify customer identities.
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Citigroup said that it had taken such measures to prevent numerous fraudulent transactions daily.
While they acknowledged the severity of online fraud, Citigroup said that lawsuits like this could disrupt established banking policies and practices.
According to Reuters, the bank contends that no system can prevent every scam, and legal action is not the appropriate solution.
However, Attorney General Letitia James alleges that Citibank's security systems failed to detect the red flags indicating potential scams, leading to financial losses for customers.
These failures include instances where customers lost huge sums, such as one case where a customer lost $40,000 of retirement savings after clicking a link in a fraudulent text message posing as Citibank.
James seeks substantial remedies from Citibank, including compensation for defrauded customers, civil fines of $5,000 per violation, and the appointment of an independent monitor to review bank records and assist in identifying victims.
According to Reuters, the attorney general accuses Citibank of pressuring victims into signing affidavits that limit their ability to recover losses, only to reject their reimbursement claims later.
(With inputs from Reuters)