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Japanese regulator halts new business at Cititrust

"We can't leave it to the bank to complete the shutdown, judging from its attitude to inspections and business."

Statement issued by Japan's Financial Services Agency

Citigroup Inc, the world's biggest financial services company, was ordered to stop taking business at its Japan trust bank, six months after it said the unit would close because of compliance problems.

Cititrust and Banking Corp can't accept new business after May 2, the Financial Services Agency (FSA) said. Citigroup said in October it would close the unit, which provides investment management and real-estate advisory services in the world's second-largest economy.

"We can't leave it to the bank to complete the shutdown, judging from its attitude to inspections and business," the FSA said in a statement yesterday. Regulators won't allow the bank to take on any new business before it closes.

Japan's regulators in September told Citigroup to close its private bank for other compliance breaches.

The New York-based lender is facing restrictions in Japan at a time when Mizuho Financial Group Inc, the nation's biggest bank, and other local firms are stepping up efforts to manage as much as US$13 trillion of financial assets held by individuals.

Citigroup Chief Executive Charles Prince met with Japanese regulators in October to apologize for breaches, including failure to make proper checks against money laundering.

Regulators said the trust bank failed to improve monitoring and controls even after ordered to do so in August 2001, according to the statement.

The unit ran an unlicensed asset-management business hidden from inspectors and concluded real-estate transactions devised to forge accounts, the agency said.

In November, Douglas Peterson, Citibank Japan's new chief executive, apologized at a parliamentary committee and said 14 officers have been fired, including eight managing directors, for their dubious actions.

Citigroup plans to close the Japan trust business, which employs 150 people, because there were "internal control, compliance and governance issues in that subsidiary," the bank said in October.
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