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New York Alleges Citibank Neglected Customer Protection Against Fraud

New York Alleges Citibank Neglected Customer Protection Against Fraud
Credits: CNN

In a recent development, the New York Attorney General, Letitia James, has initiated legal action against Citibank, accusing the financial institution of neglecting to safeguard account holders from online fraud and refusing reimbursement to customers for substantial losses of millions of dollars.

The lawsuit, filed on Tuesday, alleges that Citibank lacks robust measures to prevent unauthorized account takeovers, provides misleading information to customers regarding their rights after account breaches and thefts, and unlawfully denies reimbursements to defrauded individuals.

The state contends that Citibank’s practices have resulted in New York customers losing significant amounts, including life savings, funds designated for their children’s education, and money essential for daily living.

New York Alleges Citibank Neglected Customer Protection Against Fraud

NY AG sues Citibank for failing to protect customers (Credits: CNN)

One victim from New York reportedly lost $40,000 after receiving a text message instructing her to log in to a website or contact her local branch. Despite not providing the requested information, the woman reported the suspicious activity to her branch, which assured her there was no cause for concern.

However, three days later, the customer discovered that a scammer had changed her password, engaged in online wire transfers, and executed a fraudulent transfer electronically. Citibank denied the customer’s fraud claim.

The Attorney General’s investigation found that Citibank’s systems inadequately respond to warning signs, such as scammers using unrecognized devices or accessing accounts from new locations.

Additionally, the bank’s procedures do not prevent the transfer of funds from multiple accounts to a single one, followed by rapid transfers of tens of thousands of dollars.

Moreover, Citibank allegedly fails to initiate automatic investigations or report fraudulent activities to law enforcement when customers initially report such incidents. This is despite Citibank being the third-largest banking institution in the U.S., according to the state.

Attorney General Letitia James stated, “Many New Yorkers rely on online banking to pay bills or save for big milestones, and if a bank cannot secure its customers’ accounts, they are failing in their most basic duty.”

Citibank responded by asserting its adherence to laws and regulations governing wire transfers. The bank claimed to work diligently to prevent threats to its customers and to assist them in recovering losses whenever possible.

Citibank clarified that banks are not obligated to compensate customers when they follow criminals’ instructions fully, and there is no indication of customer deception. However, in light of the widespread surge in wire fraud across the industry recently, the bank asserted that it has proactively implemented measures to safeguard clients’ accounts.

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