Press Release
FSC Imposes Administrative Penalty on Citibank Taiwan for a Former Wealth Management Specialist's Recommendation and Investment on Behalf of Customers of Financial Products not provided by the Bank
2023-03-07
The Financial Supervisory Commission (hereinafter referred to as FSC) imposes a penalty on Citibank Taiwan Ltd. (hereinafter referred to as Citibank) for violation of the Banking Act. It’s found that a former wealth management specialist of Citibank recommended customers to invest in financial products not provided by Citibank and facilitated financial trades on behalf of the customers. The finding showed that the Bank has failed to establish a comprehensive internal control mechanism to prevent the employee from engaging in unauthorized transactions with customers in private, which violates the regulation stipulated in Paragraph 1 of Article 45-1 of the Banking Act, and regulations in Article 3 and Article 8, Paragraph 1, Subparagraph 2, Item 12 of the "Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries". The FSC therefore imposed a penalty of NT$6 million against the Bank in accordance with Article 129, Subparagraph 7 of the Banking Act.
I. Penalized entity: Citibank
II. Legal basis for penalty: Article 129, Subparagraph 7 of the Banking Act
III. Facts and reasons of violations:
(I) A former wealth management specialist of the Bank recommended customers to invest in financial products not provided by the Bank and facilitated financial trades on behalf of customers in the period from March 2021 to July 2022. Two customers were affected, and the amount involved in the case was US$1.02 million. The duration of the violation of regulations was one year and four months. The Bank is deemed to lack a comprehensive internal control mechanism.
(II) It was found that the Bank exhibited the following deficiencies:
1. Failure to establish mechanisms for managing the sales conduct of wealth management specialists: The Bank has established mechanisms for evaluating the quality of services provided by wealth management specialists. The sales manager evaluates the quality of sales by each wealth management specialist at random intervals each month. However, it has failed to actively track subsequent improvements for the items noted in the evaluation and enhance related internal control mechanisms for management. As a result, it failed to discover that the wealth management specialist continued to exchange information with the customers through communication software not allowed by the Bank, demonstrating that the Bank's management of the sales conduct by the wealth management specialists remained inadequate.
2. Failure to establish transaction monitoring mechanisms for monetary transactions between wealth management specialists and customers in private: Although the Bank has established an employee transaction monitoring system to monitor transactions between the accounts of wealth management specialists and customers, it has not established comprehensive suspicious patterns for its monitoring system based on the features and risks of its businesses. As a result, it failed to discover that different customers who are served by the same wealth management specialist transferred funds from their accounts at the Bank to the same recipient in another bank and such transfers exceeded a specific amount, and failed to investigate the irregular transactions.
IV. Results of penalty: A fine of NT$6 million in accordance with Article 129, Subparagraph 7 of the Banking Act.
The FSC stated that banks are required to establish an ethical corporate culture and a code of conduct for employees in order to maintain the trust of the public in banks. They must also establish comprehensive account monitoring mechanisms in accordance with the "Internal Control Principles for the Prevention of Misappropriation of Client Funds by Wealth Management Specialists" and the features and risks of their businesses. The FSC also urges the public to avoid engaging in monetary transactions with their wealth management specialists in private and avoid purchasing financial products or services that are not provided by the bank. The FSC advises the public to regularly review their bank statements to protect their interests.
I. Penalized entity: Citibank
II. Legal basis for penalty: Article 129, Subparagraph 7 of the Banking Act
III. Facts and reasons of violations:
(I) A former wealth management specialist of the Bank recommended customers to invest in financial products not provided by the Bank and facilitated financial trades on behalf of customers in the period from March 2021 to July 2022. Two customers were affected, and the amount involved in the case was US$1.02 million. The duration of the violation of regulations was one year and four months. The Bank is deemed to lack a comprehensive internal control mechanism.
(II) It was found that the Bank exhibited the following deficiencies:
1. Failure to establish mechanisms for managing the sales conduct of wealth management specialists: The Bank has established mechanisms for evaluating the quality of services provided by wealth management specialists. The sales manager evaluates the quality of sales by each wealth management specialist at random intervals each month. However, it has failed to actively track subsequent improvements for the items noted in the evaluation and enhance related internal control mechanisms for management. As a result, it failed to discover that the wealth management specialist continued to exchange information with the customers through communication software not allowed by the Bank, demonstrating that the Bank's management of the sales conduct by the wealth management specialists remained inadequate.
2. Failure to establish transaction monitoring mechanisms for monetary transactions between wealth management specialists and customers in private: Although the Bank has established an employee transaction monitoring system to monitor transactions between the accounts of wealth management specialists and customers, it has not established comprehensive suspicious patterns for its monitoring system based on the features and risks of its businesses. As a result, it failed to discover that different customers who are served by the same wealth management specialist transferred funds from their accounts at the Bank to the same recipient in another bank and such transfers exceeded a specific amount, and failed to investigate the irregular transactions.
IV. Results of penalty: A fine of NT$6 million in accordance with Article 129, Subparagraph 7 of the Banking Act.
The FSC stated that banks are required to establish an ethical corporate culture and a code of conduct for employees in order to maintain the trust of the public in banks. They must also establish comprehensive account monitoring mechanisms in accordance with the "Internal Control Principles for the Prevention of Misappropriation of Client Funds by Wealth Management Specialists" and the features and risks of their businesses. The FSC also urges the public to avoid engaging in monetary transactions with their wealth management specialists in private and avoid purchasing financial products or services that are not provided by the bank. The FSC advises the public to regularly review their bank statements to protect their interests.
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- Update： 2023-03-25
