Washington, D.C. – Citibank, N.A. (CBNA) and Citigroup Global Markets Limited (CGML), collectively known as Citi, have been penalized by the U.S. Commodity Futures Trading Commission (CFTC) for failures in reporting Legal Entity Identifier (LEI) information related to swap transactions. The CFTC issued an order on September 25, 2017, simultaneously filing and settling charges against the financial institutions.
The charges center around Citi’s failure to properly report LEI data to a Swap Data Repository (SDR), deficiencies in establishing the necessary electronic systems for accurate reporting, a lack of correction for errors in previously submitted LEI data, and a failure to diligently supervise LEI swap data reporting – all violations of CFTC regulations. CBNA has been a provisionally registered swap dealer with the CFTC since December 31, 2012, while CGML, a London-based swap dealer, registered on October 9, 2013.
As a result of the violations, Citi is required to pay a $550,000 civil monetary penalty. Additionally, the company must undertake improvements to its LEI swap data reporting processes. The CFTC’s requirements for LEI reporting aim to increase transparency, standardize data, and mitigate systemic risk within the financial system.
The CFTC investigation revealed that between April 2015 and December 2016, Citi failed to accurately report LEIs for tens of thousands of swaps. A significant contributing factor was a design flaw in Citi’s systems, which didn’t automatically re-report trades when a counterparty’s LEI changed, unless another reporting event occurred. This led to the failure to update LEI information for thousands of existing swaps.
Furthermore, the Order found that Citi reported “Name Withheld” as the counterparty identifier for tens of thousands of swaps involving counterparties in certain foreign jurisdictions. While the CFTC acknowledges potential conflicts with international privacy laws, it requires alternative identifiers – a “Privacy Law Identifier” or PLI – to be reported in such cases. The investigation also indicated that CBNA and CGML failed to adequately enforce existing policies and address compliance issues related to LEI reporting.
Source: CFTC.gov
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