Citibank and Citigroup Global Markets Limited will pay a $1 million penalty to resolve allegations of not properly reporting swap data to the Commodity Futures Trading Commission (CFTC) and for violating the provisions of a 2017 order regarding those practices.

Despite Citi failing to comply with the 2017 mandate, the CFTC lauded the bank for its full cooperation with the agency’s investigation. The new order, announced Monday, requires Citi to cease and desist from further violations of the Commodity Exchange Act, comply with certain undertakings to correct information to the CFTC’s swap data repository, and update the agency on its remediation efforts.

“As this case demonstrates, the CFTC will vigorously pursue swap dealer registrants that fail to meet their reporting obligations and violate CFTC orders,” CFTC Acting Director of Enforcement Vincent McGonagle said in a press release. “Accurate swap data reporting is essential to fulfillment of the CFTC’s regulatory mandates, including monitoring systemic risk and preventing market abuse.”

Citi did not properly report the legal entity identifier (LEI) to each counterparty in a swap in “tens of thousands” of swap transactions, according to the order. It also failed to meet conditions of no-action relief it sought to rely on for more than 100,000 swap transactions that lacked LEIs and failed to diligently supervise swap dealer activities regarding swap transaction reporting.

The 2017 order highlighted many of the same failings, the CFTC said.

“We are pleased to have the matter resolved,” said a Citi spokesperson.

From 2013 to November 2019, Citi hired a third-party service provider to report certain swap transactions to the CFTC. The provider reported “name withheld” instead of a valid LEI or privacy law identifier. Citi failed to properly supervise the reporting service and make corrections in a timely fashion, the CFTC stated.

It took Citi over 18 months to complete upgrades to its internal systems so it could properly report to the CFTC’s swap data repository, the agency said.

According to the CFTC’s record-keeping requirements, “[S]wap data that does not identify eligible counterparties with an LEI hinders the Commission’s fulfillment of its regulatory mandates, including monitoring systemic risk, market monitoring, and market abuse prevention.”

Compliance takeaways: As part of the settlement, Citi agreed to correct all swap data reporting errors brought to its attention by CFTC enforcement staff. Within 180 days, Citi shall make a report to the Commission regarding the status of its remediation efforts.

Within a year, Citi shall submit a written report detailing remediation efforts for:

  • Policies, procedures, and controls governing LEI swap data reporting obligations, including procedures for issue escalation to senior management;
  • Independent periodic testing of compliance with LEI swap data reporting obligations;
  • The qualifications and training of staff responsible for compliance; and
  • The status of any LEI swap data reporting issues escalated to senior management.

The report will contain a certification from Citi’s chief compliance officer regarding whether the policies, procedures, and controls contained in the order are sufficient to satisfy the terms of the CFTC’s order.

Similar actions: The CFTC on Monday also fined Mizuho Capital Markets $1.5 million and Refinitiv $650,000 for swap reporting violations.

Aaron Nicodemus covers regulatory policy and compliance trends for Compliance Week. He previously worked as a reporter for Bloomberg Law and as business editor at the Telegram & Gazette in Worcester, Mass.

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