Bank fined USD 17.9m for failure to buy flood insurance

  • 21 February 2020

ORX News op risk story of the month: January 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 that month. This story was published by the service in January 2020.

Citibank fined USD 17.9 million for failure to buy flood insurance on behalf of borrowers

On 21 January 2020, the US Office of the Comptroller of the Currency (OCC) announced that it had ordered Citibank to pay a USD 18 million (EUR 16.2 million) civil money penalty. This was after Citibank failed to timely purchase flood insurance for borrowers who had loans secured by buildings and mobile homes located in areas at risk of flooding, in violation of the Flood Disaster Protection Act of 1973.

The OCC consent order, signed on 17 January 2020, states that Citibank had a flood act compliance programme which involved an unnamed third-party responsible for servicing its loans. This programme aimed to ensure that the collateral securing its customers’ loans had appropriate flood insurance cover.

Banks typically have 45 days after notifying borrowers of the required insurance to put a policy in place. However, an OCC investigation, which began in 2017, uncovered that Citibank’s policies and procedures allowed its third-party servicer to delay buying insurance beyond this 45-day period, resulting in late purchases of flood insurance for borrowers who were at risk. According to court documents, these late purchases occurred since 2014.

As of 21 January 2020, Citibank has neither admitted nor denied the OCC’s allegations, but has paid a civil money penalty of USD 17,998,510 to the Federal Emergency Management Agency’s National Flood Insurance Program.

If your firm subscribes to ORX News, then you can read the full story and more like it on the ORX News website.

Op risk losses categorised for easy analysis

Every single ORX News story is categorised to help you get the most from the data. The categories include the business line, event type, scenario category. All of this information makes it easier for you to use and analyse the loss events.

Extract of the data for this story from ORX News:

Business line: Retail Banking
Event type: Clients, Products & Business Practices
Loss USD: EUR 16,226,736.68
Loss EUR: USD 17,998,510.00
Country: United States
Scenario category: Vendor failures

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