FINRA Fines Citigroup $500,000 for Failing to Supervise Sales Assistant Who Misappropriated Customer Funds
WASHINGTON – The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Citigroup Global Markets, Inc. $500,000 for failing to supervise Tamara Moon, a former registered sales assistant at the firm's branch office in Palo Alto, California. Over an 8 year period, Moon misappropriated $749,978 from 22 customers, falsified account records and engaged in unauthorized trades in customer accounts.
Moon took advantage of Citigroup's supervisory lapses at the branch and targeted elderly, ill or otherwise vulnerable customers whom she believed were unable to monitor their accounts. Moon's victims included elderly widows, a senior with Parkinson's disease and her own father. FINRA previously barred Moon for her actions and is continuing to investigate other individuals involved in the supervision of Moon.
FINRA found that Citigroup failed to detect or investigate a series of "red flags" that upon further inquiry should have alerted the firm to Moon's improper use of customer funds. The red flags included exception reports highlighting conflicting information in new account applications and customer account records reflecting suspicious transfers of funds between unrelated accounts. Citigroup also failed to implement reasonable systems and controls regarding the supervisory review of customer accounts, thus enabling Moon to falsify new account applications and other records.
Brad Bennett, Executive Vice President and Chief of Enforcement said, "Tamara Moon used her knowledge of Citigroup's lax supervisory practices at the branch to take advantage of some of the firm's most vulnerable customers, including the elderly. Citigroup had reason to know what she was doing and could have stopped her."
In one incident, Moon misappropriated nearly $80,000 from an elderly widow's account. An exception report highlighted two address discrepancies in the customer's account documents where the street address did not correspond to the city and zip code provided for the address and the telephone prefix did not match the zip code of the address. Moon, who had entered the account information, attempted to explain to Citigroup that the discrepancies arose because the client had moved to Arizona, an explanation that did not seem reasonable. Nonetheless, Citigroup accepted Moon's explanation without further inquiry, thus enabling Moon to continue her misappropriation of customer funds.
Citigroup also failed to detect suspicious activity involving transfers and disbursements in the accounts Moon used to misappropriate customer funds.
In another instance, Moon created an account in the name of a deceased customer even after Citigroup had been notified that the customer was deceased. Moon then created a fraudulent account in the name of the deceased customer's widow. Moon transferred $10,440 from the deceased customer's fraudulent account to the widow's fraudulent account. A few weeks later, Moon had checks issued for $5,000 and $2,500 from the fraudulent account set up in the widow's name to Moon's personal bank account.
In a separate incident, Moon transferred $150,000 from an account held by a customer to a fraudulent account Moon created in her father's name. Two days later, Moon transferred $90,000 from the fraudulent account in her father's name to an account Moon controlled. Citigroup's review of customer account records was deficient and prevented the firm from detecting red flags concerning Moon's misconduct.
In concluding these settlements, the firm neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
FINRA's investigation was conducted by Jessica Hopper, Anthony Trambley and Sandra Del Buono.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2010, members of the public used this service to conduct 17.2 million reviews of broker or firm records. Investors can access BrokerCheck online at www.finra.org/brokercheck or by calling (800) 289-9999. Investors may find copies of this disciplinary action as well as other disciplinary documents in FINRA's Disciplinary Actions Online database.
FINRA, the Financial Industry Regulatory Authority, is the largest non-governmental regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing and enforcing rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit our website at www.finra.org.