Hong Kong's securities regulator has fined Citigroup the equivalent of $770K for failing to report a Ponzi scheme involving one of its former employees.  Citigroup also was ordered to compensate affected customers and hire an external expert to review some of its operational pols and procedures, according to statement issued by HK's Securities and Futures Commission. The SFC charged a Citigroup employee with running the fraudulent scheme between 2004 and 2009.  The 13 Citigroup Asia customers who were affected placed funds with the cited employee believing that their money would be used to purchase U.S. Treasuries and other securities products. Citigroup Asia subsequently dismissed the employee for gross misconduct, but that didn't satisfy the HK regulator, which charged Citigroup with failing to report the activities in a timely manner and with not forwarding the bank's preliminary report until after an external investigation was completed. In a statement, Citi said it accepted the decision and actions of the SFC, and had already taken steps to further strengthen its prevention, supervisory and detection processes. Yet, Another Blow to Citigroup. The bank reportedly is being investigated by Japanese regulators, as well, for possible infractions relating to its marketing of financial products and could face its 3rd major punishment in Japan in 7 years.   [Reuters, 10/3/11]

[C-I Note: Citigroup has had its fair share of problems in Asia.  The biggest one occurred in 2004 when Citi was working hard to establish a major outpost in Japan, only to be derailed by major regulatory violations.  Independent investigations conducted by Japan's securities regulators revealed major violations of law by Citi's Private Banking unit.   The case details the irregularities in Citigroup's Japanese operations, and concluded with then-CEO Chuck Prince and local Citigroup officials making "deep bowed" apologies to the government and citizens of Japan.]