The Attorney General of New York has filed a lawsuit against Citibank, alleging negligence in safeguarding customers against fraudulent activities and scams.
The legal action contends that Citibank lacks robust online security measures to thwart unauthorized access to accounts, provides misleading information to account holders regarding their rights post-account breaches, and unlawfully denies reimbursement to victims of fraudulent transactions.
According to the Office of the Attorney General (OAG), there is substantial evidence indicating Citibank's inadequate response to fraudulent incidents, resulting in substantial financial losses for New York customers, including the loss of entire life savings in certain cases, due to exploitation by scammers and hackers.
Attorney General Letitia James seeks to hold Citibank accountable for its actions, demanding restitution for defrauded New Yorkers, along with interest and penalties. Additionally, the lawsuit aims to compel Citibank to implement enhanced anti-fraud measures to safeguard consumers' funds from being unlawfully obtained by scammers.
In response, Attorney General James stated, "Banks are entrusted with ensuring the safety of customers' funds, yet Citibank's negligence has facilitated the theft of millions from hardworking individuals. The failure to secure customer accounts is a fundamental breach of duty, and Citibank must be held responsible. My office will not tolerate illegal conduct from major financial institutions."
The investigation by the OAG uncovered several shortcomings in Citibank's systems, including ineffective response to warning signs of fraudulent activities such as unrecognized devices, access from new locations, and changes in account credentials. Moreover, Citibank's systems fail to flag and halt suspicious fund transfers, nor do they promptly initiate investigations or report fraud to law enforcement upon consumers' complaints.
Furthermore, Citibank's response to fraud notifications from customers is deemed inadequate, with lengthy telephone holds allowing scammers to continue their illicit activities. The bank also fails to implement adequate measures to prevent future unauthorized transactions until customers physically visit a branch and provide detailed information on the fraudulent incidents.
Attorney General James alleges that Citibank's provision of wire transfer services via online and mobile banking obligates it to reimburse victims of fraud under the Electronic Fund Transfer Act (EFTA), akin to reimbursements for electronic credit or debit card fraud.
Under the EFTA, banks like Citibank are mandated to reimburse customers for losses incurred through unauthorized electronic payments. The OAG accuses Citibank of exploiting a legal loophole to deny reimbursement claims, resulting in significant financial losses for New York consumers.
Through this lawsuit, Attorney General James seeks to halt Citibank's deceptive practices and secure restitution for victims who were wrongfully denied reimbursement, along with penalties and disgorgement of profits.
In response to the allegations, Citibank asserts its compliance with relevant laws and regulations concerning wire transfers, emphasizing its dedication to preventing threats and assisting clients in recovering losses whenever possible. The bank argues that it is not obligated to reimburse clients who willingly comply with fraudulent instructions without indication of deception.
Nevertheless, Citibank acknowledges the surge in wire fraud incidents and asserts its commitment to bolstering security measures and educating clients about emerging threats to mitigate losses.
In summary, the lawsuit underscores Citibank's alleged negligence in protecting customers from fraud, with the Attorney General seeking restitution and penalties to rectify the situation and prevent further harm to consumers.
