Jonathan Stempel
NEW YORK (Reuters) – Citigroup on Tuesday urged a federal judge to dismiss New York Attorney General Letitia James’ lawsuit accusing its Citibank unit of failing to reimburse customers who were victims of online scams.
While acknowledging that the problem of online wire fraud is “real,” the third-largest U.S. bank accused James of “misguided” efforts to prosecute it under the federal law governing electronic funds transfers because it specifically excludes wire transfers.
Citigroup said the relevant Uniform Commercial Code standard, which all U.S. states use, exempts banks from covering losses if they take commercially reasonable security measures in good faith to verify customers’ identities.
The New York bank said it did so and is stopping “countless” fraudulent transactions every day.
“No system can detect every fraud every time,” but the solution is not a lawsuit that would “suddenly and dramatically disrupt the way banks have structured their policies and practices for decades,” Citigroup said in a federal filing. Manhattan court.
James’ office did not immediately respond to a request for comment.
The attorney general sued Citibank in January.
She said the failure of its security systems to effectively investigate red flags such as the use of unknown devices, changing usernames and passwords, and “phishing” allowed fraudsters to steal millions of dollars.
In one case, a customer allegedly lost $40,000 in retirement savings after clicking a link in a text message that appeared to be from Citibank.
James also accused Citibank of forcing victims to sign affidavits that allegedly limited their ability to recover damages, and then summarily denied the reimbursement claims.
The attorney general wants Citibank to return money to defrauded New Yorkers, pay a civil penalty of $5,000 for each violation, and appoint an outside monitor to review bank records and find victims.
The case is New York v. Citibank NA, U.S. District Court, Southern District of New York, No. 24-00659.