New York Attorney General Leticia James on Tuesday filed a federal lawsuit against Citigroup Inc. that alleges the bank did not protect and failed to reimburse victims of fraud.
The bank did not respond to fraud appropriately and quickly, and its actions have cost New York customer millions of dollars in losses, the suit said.
A Citigroup spokesperson said the bank “closely follows” wire transfer laws and works “extremely hard” to prevent them.
Banks aren’t required to pay clients back if they “follow criminals’ instructions” and if banks receive no indications that clients are being deceived, the spokesperson said.
The bank has also stepped up efforts to prevent fraud against customers and its actions have “significantly” reduced wire fraud, the spokesperson said.
The suit by the New York Attorney General requests the court to order Citigroup to restore millions of dollars in lost money and pay damages to all injured consumers.
James is also seeking a civil penalty of $5,000 for each violation of general business law by Citigroup as well as reimbursement for court costs, and other financial penalties.
In a complaint filed in U.S. District Court for the Southern District of New York, James said Citigroup “does not implement strong online protections to stop unauthorized account takeovers, misleads account holders about their rights after their accounts are hacked and funds are stolen, and illegally denies reimbursement to victims of fraud.”
College savings, life savings and money to support day-to-day activities have been lost, the lawsuit said.
James cited a New Yorker who lost $40,000 from her retirement savings after she received a text message that appeared to be from Citi. The text instructed her to log onto a website or call her local branch.
She clicked a link in the message but did not provide any information that was requested.
She then called her local Citi branch to report suspicious activity “but was told not to worry about it,” the suit said.
The customer then discovered that a scammer changed her bank password, moved $70,000 into her checking account, and then made a $40,000 wire transfer.
The suit said none of this activity was consistent with the customer’s past account activity.
Her fraud claim was later denied by the bank, the complaint said.
The Attorney General’s office said it has found that Citi’s systems “do not respond effectively to red flags, such as scammers who are using unrecognized devices, are accessing accounts from new locations, or are changing banking passwords or usernames.”
Citigroup’s stock rose 3% on Tuesday.
