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Citi Indonesia Arm Hit by Claim Employee Stole Millions

Citigroup has been barred from selling wealth management services to new clients in Indonesia after allegations that a long-time employee stole millions of dollars from customers of its premium retail bank.

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Source: CLSA

The ban was revealed on Wednesday by Darmin Nasution, Indonesia’s central bank governor, who told legislators Citi had been instructed to “temporarily suspend” recruitment of new clients to Citigold, the US bank’s flagship service for wealthy customers.

International banks covet the business of rich Indonesians and much of the wealth management industry in neighbouring Singapore caters to their needs. Citi’s run-in with the Indonesian authorities also highlights some of the risks of the US bank's global strategy, which is predicated on tapping into fast-growing emerging markets.

“We are seeking clarification on the comments made but of course we will comply with whatever our regulator requires,” Citi said: “We understand it was said to be a temporary measure and has no impact on the services we offer our existing Citigold customers. Our focus is on co-operating fully with all authorities to bring the investigation to a conclusion and resolve the matter”.

Citi has operated in Indonesia for more than four decades, and last year established brokerage operations to expand in what it considers an important overseas market. The ban on recruitment of new Citigold customers follows two scandals that have thrust the US financial group into the local media spotlight.

Malinda Dee, a customer relations manager, was arrested last week after Citi uncovered alleged illegal transactions of about $2m. A teller is also being investigated.

Ms Dee could not be reached for comment.

Shariq Mukhtar, Citi’s top Indonesia representative, was summoned to answer questions by lawmakers, some of whom symbolically handed over Citi credit cards during a televised hearing.

“We took swift action, including reporting the incident to appropriate authorities and we are continuing to cooperate with them fully”, Mr Muktar said. “Let me assure you that we have zero tolerance for any sort of behavior that violates our strict code of conduct.”

At another Citi branch in the Indonesian capital, authorities are investigating the mysterious death last week of a client who was questioned by three of the bank’s external debt collectors.

The men are in police custody and face possible murder charges.