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New York Sues Citi for Allegedly Failing to Protect and Reimburse Fraud Victims

Citi building

New York Attorney General Letitia James accused Citi of failing to protect fraud victims.

In a lawsuit filed Tuesday (Jan. 30), the state’s top prosecutor alleged that the banking giant has no protections against account takeovers, misleads customers about their rights when their accounts are hacked, and unlawfully denies fraud victims reimbursements.

“Banks are supposed to be the safest place to keep money, yet Citi’s negligence has allowed scammers to steal millions of dollars from hardworking people,” James said in a news release. “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. There is no excuse for Citi’s failure to protect and prevent millions of dollars from being stolen from customers’ accounts, and my office will not write off illegal behavior from big banks.”

The suit alleged that because Citi makes wire transfers available to consumers online and through mobile banking apps, it must reimburse victims of fraud under the Electronic Fund Transfer Act (EFTA).

In a statement issued to PYMNTS, a Citi spokesperson said the bank follows all laws and regulations related to wire transfers, works to prevent fraud, and assists clients in recovering losses when possible.

“Banks are not required to make clients whole when those clients follow criminals’ instructions and banks can see no indication the clients are being deceived,” the statement read. “However, given the industry-wide surge in wire fraud during the last several years, we’ve taken proactive steps to safeguard our clients’ accounts with leading security protocols, intuitive fraud prevention tools, clear insights about the latest scams, and driving client awareness and education.”

Citi’s remarks about a surge in wire fraud are in keeping with findings from the PYMNTS Intelligence report “Increasing Fraud Heightens Need for Newer, Better Technologies.”

According to the study, financial institutions recorded an increase in fraud in 2023 compared to the prior year. FIs with assets of $5 billion or more saw the average cost of fraud jump by 65% between 2022 and 2023, from $2.3 million to $3.8 million.

Altogether, more than 40% of banks in the United States reported an increase in fraud in the same period, leading to a surge in fraudulent transactions and financial losses.