Bank pays USD 4.5 m to CFTC for flaws in audio preservation system
- 12 October 2020
ORX News story of the month: September 2020
Each month, we share a free operational risk loss event story from ORX News. The story is handpicked by the team as one of the most interesting stories reported by the service in the previous month. This story was published by the service in September 2020.
Bank pays USD 4.5 million to CFTC over design flaws in its audio preservation system
In September 2020, three Citigroup entities were ordered by the CFTC to pay $4.5m over a design flaw in their audio preservation system, which saw subpoenaed recordings deleted from the system.
The CFTC, in December 2017, subpoenaed audio recordings that were pertinent to an ongoing investigation the CFTC was carrying out in connection with Citigroup. However, the audio preservation system had a design flaw, whereby once the system had reached 95% of its storage capacity, the system would automatically begin deleting recordings from exactly two years earlier.
In December 2018, after the CFTC had again requested that Citibank produce the recordings to comply with the subpoena, Citibank informed the CFTC that the audio recordings had been deleted. The resulting CFTC investigation found that senior management at the company responsible for the audio preservation system had been aware of the design flaw since at least 2014. Management were also reportedly responsible for not adequately staffing the company with trained employees, and for not documenting changes to the system which lead to the recordings being deleted.
By failing to adequately supervise its subsidiary, the CFTC found Citibank in violation of CFTC Regulation 166.3 and fined the bank $4.5m.
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Extract of the data for this story from ORX News:
Business line: Corporate Items
Event type: Execution, Delivery & Process Management
Loss amount: USD 4,500,000.00
Country: United States
Scenario category: Vendor Failures