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Mistakenly transferred $504m to be returned to Citigroup
Judge rules that creditors should return $504m that was accidentally transferred to them by Citigroup
More than half a billion dollars transferred by mistake will have to be returned to US bank Citigroup after it won a court appeal.
In 2020, a Citigroup employee accidentally sent creditors of cosmetics company Revlon nearly $900m when it paid off a loan early in error. The human error happened on a software system that Citigroup was in the process of upgrading.
Some of the lenders returned the money they were sent, but others didn’t, and last year a judge decided they did not have to pay back the $504m. That ruling said the accidental transfer was “final and complete transactions, not subject to revocation”.
But on appeal in a federal court, the earlier decision was overturned and the money will have to be returned.
Citigroup said in a statement: “Today’s ruling reaffirms our long-held belief that these mistakenly transferred funds should be returned as a matter of law, as well as ethics. While Citi has taken steps to reduce the likelihood of such an error in the future, today’s decision provides welcome stability and upholds the concept of cooperation needed for a well-functioning syndicated lending market.”
According to a Financial Times report, Eric Talley, a Columbia Law School professor, said: “The circumstances [of the accidental transfer] were suspicious enough that the lenders should have picked up the phone to check with Citigroup, and had they done so, they would have quickly learned that the payment was a mistake.”
At the time of the blunder, Citigroup CEO Jane Fraser said it was “massive unforced error” and was evidence that more manual processes needed to be automated.
Banks are rapidly removing manual processes from their operations with huge investments in technology such as robotic process automation (RPA) to automate manual processes. This software automates repetitive tasks, freeing up staff to focus on higher-value activity, saving time and reducing errors.
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