As was mentioned in the article, Citibank has a "six-eyes" policy. They had three people review and approve this transaction. They were all confused by the interface.
(I am not sure what this policy means if one of the three people has lost an eye; presumably it requires a fourth approval.)
> Citibank's procedures require that three people sign off on a transaction of this size. In this case, that was Raj, a colleague of his in India, and a senior Citibank official in Delaware named Vincent Fratta. All three believed that setting the "principal" field to an internal wash account number would prevent payment of the principal. As he approved the transaction, Fratta wrote: "looks good, please proceed. Principal is going to wash."
I can only pity the poor chap who made the mistake. But then I would also assume such large sums would require multiple signatures/ approvals at Citibank which makes it strange why the error happened.
Citibank's procedures require that three people sign off on a transaction of this size. In this case, that was Raj, a colleague of his in India, and a senior Citibank official in Delaware named Vincent Fratta. All three believed that setting the "principal" field to an internal wash account number would prevent payment of the principal. As he approved the transaction, Fratta wrote: "looks good, please proceed. Principal is going to wash."
I don't think that's a smart move. Let's give them some benefit of doubt and bring this to their attention. I have messaged them on their facebook. Hope this will help.
P.S. I am not a Citibank fan or something. Just trying to deal with this sanely.
Yea....this is why you require a second pair of eyes and upper level management approval for these type of transfers. No one person should be able to give away the bank.
I'd think they could, but that would bring up the question of how many transactions Citibank had properly run through the software.
I doubt Citi would want to pursue that sort of a suit, since it would lkely highlight they were at fault. Sure the software is probably difficult to use, but if they already knew how to use it, then using it incorrectly is not the fault of the UI.
Citibank did not fat finger. They have have made an appropriate transfer to an appropriate destination under an incorrect internal book keeping line item. That's why the case was not about a wire being reversed - rather it was the case if the under their agreement with a customer that not on schedule payment could have been used by the customer to complete a transaction.
Now that the decision is out we have more details on what caused the blunder, and it's a good (terrifying?) lesson in the importance of good system and UI design:
> Citi’s software will only let you pay principal to some lenders if you pretend to pay it to every lender, and it will only let you pretend to pay principal to every lender if you check the “just pretend” box next to “PRINCIPAL” (fine!) and “FUND” (what?) and “FRONT” (what even?).
> Raj then proceeded with the final steps to approve the transfers, which prompted a warning on his computer screen — referred to as a “stop sign” — stating: “Account used is Wire Account and Funds will be sent out of the bank. Do you want to continue?” But “[t]he ‘stop sign’ did not indicate the amount that would be ‘sent out of the bank,’ or whether it constituted an amount equal to the intended interest payment, an amount equal to the outstanding principal on the loan, or a total of both.” Because Raj intended to release “the interim interest payment to [the] [L]enders,” he therefore clicked “YES.”
If you don’t get the money you’ll call up Citibank again to complain and they’ll take the hit to their operational losses budget [0], which happens infrequently as a percentage of transactions but quite frequently over the totality of the system. That’s what the budget is for.
[0] Contingent on the transaction going through and not being reversible, which can happen for many reasons (staleness by the time you report it, disinclination of someone who enjoys Monopoly to repay Bank Error In Your Favor, CS staff not having a button that reverses the transaction, Citi’s ops team [1] considering it beneath their notice, etc.)
[1] I oddly enough know the name of their SVP in charge of this team because Citi escheated a check due to me to the state of Illinois back in 200X. Illinois told me they had insufficient information to determine that I’m the same Patrick McKenzie so they want said SVP to file a report on my behalf. I assess 80%+ likelihood that they’ll comply. This is boring inside baseball mostly meant to underline the fact that BigBank actually does have people with names and addresses who deal individually with transactions according to some fairly involved business processes.
The article says "with accounts run by Citigroup Inc. and a credit union at Stanford University". If the accounts are run by these partner banks, maybe that means you will be able to contact the partner bank's customer service when stuff like this happens.
I feel a little suspicious of the story that there were two mistakes here.
1) Citi paid the wrong amount (they paid the full outstanding amount, rather than just the one payment)
2) Citi paid out of the wrong account (Citi’s account instead of Revlon’s account)
In particular, I’m suspicious of the second claim. If Citi had paid the correct amount out of this “wrong” account, would anyone have noticed? Is it possible that paying out of account on behalf of clients is actually a normal practice? After finding out that they paid the wrong amount, is it possible that the “wrong account” is a convenient legal cover to make it more likely the payment can be reversed?
> "Citi reserves the right to close an account at any time and for any reason, with or without cause."
This is the truth, and I imagine it applies to just about every bank. Years ago, a friend of mine had this happen to her with USAA. It took an Executive Email Carpet Bomb to get resolved, and I haven't banked with USAA since.
I can absolutely recommend having a few accounts at different institutions, preferably at local or regional credit unions. I'm sure they have this same right to cease business with a customer, but I think it would be easier to resolve (if it happens in the first place). But by having multiple accounts, you can avoid losing access to the total sum of your money all at once, which is what happened to my friend.
In all my (involuntary) dealings with them over quite a few decades, I have found them to be the most greedy, deceptive and predatory company I have ever come across.
If you are a customer of theirs, I'd advise you to count your fingers, and the numbers in your accounts, after every transaction.
I think one of the commenters on Twitter got it right. The fact that Citi did not back down after a CFBP tells me there is a SAR (Suspicious Activity Report) on the file, which the bank is not legally allowed to inform the customer about.
Hey. Jason Goldberg here.
Do I think Citibank or Citigroup is a homophobic malicious company? No.
Do I think some compliance officer is a moron who made a really stupid decision? Yes.
Three hours of trying to sort this out provided even more comedic insanity than I even revealed on the blog post. Including a bank manager who didn't want to talk about this because she was uncomfortable talking about the content of our blog over a recorded phone conversation.
Oh, and we've learned that the account was marked to be a cancelled by said compliance officer for this "objectionable content." wtf.
All we know so far is that we finally got someone to lift the block on the account, but that the best she could promise is another review of the situation today.
(I am not sure what this policy means if one of the three people has lost an eye; presumably it requires a fourth approval.)
reply