Citigroup Inc. has stopped soliciting clients for some retail banking products in Japan as it awaits the outcome of a government investigation into its compliance with local rules, two sources said.
The U.S. bank told employees at its Japan retail unit in late June not to market financial products such as investment trusts and foreign currencies, said the sources, who declined to be identified as the information is confidential.
Citibank Japan Ltd. is currently reviewing its compliance processes and offering training to staff to improve internal controls, the sources said. Citigroup, which has 32 branches and offices in Japan with 1,780 employees, still helps customers exchange currencies or buy products if asked, they said.
The bank faces a possible penalty from the Financial Services Agency as soon as this year for failing to fully explain product risk to retail customers, two sources familiar with the situation said earlier this month. It would be at least the third time Citigroup has been punished by Japanese regulators since 2004. Revenue and profit at the bank’s local unit fell in the three months ended June.
Mika Nemoto, a Tokyo-based spokeswoman for Citigroup, declined to comment on the bank suspending solicitation of clients for some products.
The penalties may include suspension of operations at some outlets, according to the sources who spoke earlier this month. The agency ended an on-site inspection of the bank’s Tokyo offices in July, they said.
Citigroup possibly had insufficient information, such as the age and occupation of customers, needed to measure the degree of risk they should take, the regulators pointed out, according to the sources.
Citigroup Japan’s profit fell 78 percent in the three months ended June 30 from a year earlier to ¥1.1 billion, the company said in August. Revenue declined 23 percent to ¥20.7 billion.
In 2009, Citigroup was ordered by Japan’s regulator to suspend marketing of banking services to individuals for a month after failing to install adequate internal controls to detect and monitor suspicious transactions.
In 2004, the company was ordered to close its private banking operations in the country.
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