Japan's Financial Services Agency is nearing the completion of an investigation into the local arm of Citigroup on suspicion of lax compliance in a number of areas. The FSA will likely issue sanctions as early as this month.  It would be the third major sanction of Citi in seven years. According to Wall Street Journal sources, the banking watchdog has found that the bank didn't provide sufficient disclosure about financial products such as investment trusts when selling them to customers and failed to adequately screen customers for product suitability. Additionally, the FSA is still examining whether anti-money laundering controls might have been lax. Citigroup Chief Executive Vikram Pandit was in Tokyo earlier in September and had a meeting with FSA officials to discuss the inquiry. How severe any FSA sanction might be has yet to be decided, but given the previous problems, one option open to the FSA might be to order the bank to suspend its retail operations for a certain period of time. Japan's regulator, which has been conducting strict inspections of Japanese and foreign financial institutions in recent years in an effort to improve confidence in Tokyo's financial markets, occasionally imposes a financial penalty for violations. Any fresh FSA sanction would be a blow to Citi as it seeks to expand its business in Asia. It also would revive Japanese memories of 2004, when the FSA took administrative and punitive actions against Citibank Japan in connection with multiple violations of laws and regulations by the bank's private-banking and other divisions. The bank was forced to close its private bank, and the image of the former head of Citigroup's Japanese operations, Douglas Peterson, and then-Citi Chief Executive Charles Prince adopting the formal Japanese custom of bowing deeply to apologize at a news conference left a lasting impression. Five years later, the FSA ordered Citibank Japan to suspend sales activities at the bank's retail business, including advertising, for a month for what it called lax policies to protect against money laundering. [WS Journal, 10/1/11]