New York attorney general takes on Citibank over fraud protection failures

January 31, 2024 Robert Abruzzese, Courthouse Editor

Attorney General James argues that under the Electronic Fund Transfer Act (EFTA), Citi is obligated to reimburse victims for losses incurred due to unauthorized electronic transactions.
Photo: Ted Shaffrey/AP

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New York Attorney General Letitia James has filed a lawsuit against Citibank, N.A. (Citi), accusing the banking giant of failing to adequately protect its customers from electronic fraud and refusing to reimburse those affected.

The lawsuit, stemming from numerous complaints by New York account holders, alleges that Citi’s security measures and anti-fraud protocols fall short of preventing unauthorized account access, leading to substantial financial losses for consumers, including life savings in some cases.

“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,” AG James said. “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,” James continued.

According to the Attorney General’s Office, Citi’s approach to handling fraud claims and its subsequent communication with victims have been both misleading and inadequate. Victims, some of whom have lost tens of thousands of dollars, were often left uninformed about their rights and faced unwarranted denial of reimbursement despite evident unauthorized transactions.

Court documents explain accounts of New Yorkers who have fallen prey to sophisticated scams, losing significant amounts of money due to what the attorney general deems as Citi’s negligence.

In one instance, a retiree lost $40,000 from her retirement savings after a scammer, exploiting Citi’s lax security measures, managed to execute unauthorized wire transfers. Another account holder was defrauded of $35,000 through a scheme involving deceitful communication and the bank’s failure to verify the transactions properly.

The lawsuit criticizes Citi for its reactive rather than proactive stance on security, pointing out the bank’s failure to respond effectively to red flags indicative of fraudulent activity. It also accuses Citi of providing insufficient support to customers reporting fraud, often leaving them on hold for extended periods while their funds were being siphoned off by scammers.