FINRA fined Citigroup Global Markets $500,000 for failing to supervise a former registered sales assistant at a firm branch office in California.  Over an 8-year period, assistant Tamara Moon misappropriated $500,000 from 22 customers, falsified account records and entered unauthorized trades in customer accounts.

Supervisory Lapses.   Moon took advantage of Citigroup's alleged supervisory lapses at the branch to target customer who couldn't readily monitor their accounts - the elderly, ill and infirmed, or vulnerable customers whom she viewed as "easy prey."  She even hit her own father.  Citigroup also failed to implement reasonable systems and controls regarding the supervisory review of customer accounts - which ultimately enabled Moon to falsify new account applications and other records.

FINRA previously barred Moon for her actions and continues to investigate others who may have been involved with supervising her.

Red Flags.   Citigroup ultimately failed to detect or investigate a series of "red flags" that, had they done so, would have alerted them to Moon's improper use of customer funds.  Red flags included: 

• exception reports highlighting conflicting information in new account applications; 
• customer account records reflecting suspicious transfers of funds between unrelated accounts.

For example, ... after Moon misappropriated nearly $80,000 from an elderly widow's account, an exception report highlighted 2 very obvious address discrepancies in the customer's account documents.  Moon, who had entered the account information, explained to Citigroup that the discrepancies arose because the client had moved to Arizona - an explanation that didn't seem reasonable to FINRA investigators.  Citigroup supervisors however accepted Moon's explanation without further inquiry.  

• Citigroup also failed to detect suspicious activity involving transfers and disbursements in the accounts Moon used to misappropriate customer funds. 

For example, ... Moon created an account in the name of a deceased customer even after Citigroup had been notified that the customer was deceased.  She then created a fraudulent account in the name of the deceased customer's widow., and transferred $10,440 from the deceased customer's fraudulent account to the widow's fraudulent account.  A few weeks later, Moon had checks issued for $5,000 and $2,500 from the fraudulent account set up in the widow's name to Moon's personal bank account.

In another example, ...   Moon transferred $150,000 from an account held by a customer to a fraudulent account Moon created in her father's name.  Two days later, she transferred $90,000 from the fraudulent account in her father's name to an account Moon controlled.  Citigroup's review didn't detect anything suspicious. 

FINRA Staff Credits.   Investigation by Jessica Hopper, Anthony Trambley, Sandra Del Buono.

[FINRA News Release, 8/9/11]   For further details, go to:   [Citigroup Global Markets, Inc. Action]