RBI imposes Rs.5 Crore Monetary Penalty on Citibank

The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs.5.00 crore on Citibank N.A. (the bank) for contravention of Section 26A of the Banking Regulation Act, 1949 (the BR Act) read with Paragraph 3 of ‘The Depositor Education and Awareness Fund Scheme, 2014 – Section 26A of Banking Regulation Act, 1949 – Operational Guidelines’, Section 10(1)(b)(ii) of the BR Act, and non-compliance with RBI Directions on ‘Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks’ read with ‘Reserve Bank of India (Know Your Customer (KYC)) Direction, 2016’.

RBI conducted the bank’s Statutory Inspection for Supervisory Evaluation (ISE 2021) based on its financial situation as of March 31, 2021.

The examination of the Risk Assessment Report/Inspection Report pertaining to ISE 2021, and all related correspondence in that regard, revealed, inter alia, contravention of the aforementioned provisions of the BR Act and non-compliance with the aforesaid directions by the bank to the extent it (i) failed to credit the eligible amount to Depositor Education and Awareness Fund within the prescribed time period, (ii) paid remuneration in the form of commission to its certain staff members, and (iii) outsourced monitoring and disposal/closure (decision making function) of AML (Anti-Money Laundering) alerts to a Group company.

As a result, the bank was served with a notice requiring it to show cause why a penalty should not be imposed for failing to comply with the stated directive.

After considering the bank’s response to the notice, additional information provided by the bank, and oral submissions made during the personal hearing, the RBI concluded that the aforementioned charge of violation of BR Act provisions and non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty.