Citi backtracks on New York online fraud case, says we’re not ‘bad guys’ | World news

“Citi and the banking industry are in no way the bad guys here,” Julia Strickland, an attorney at Citibank, told the judge. She said the state is trying to inappropriately rewrite the Electronic Fund Transfer Act through “lawsuits rather than legislation,” which Citi has argued in a filing would “dramatically disrupt the way banks have organized their policies and practices for decades ‘.

The New York lawsuit comes as consumers lose billions in financial fraud to scammers who use more sophisticated tools, including artificial intelligence, to deceive victims. The Federal Bureau of Investigation found that Americans lost $12.5 billion to online fraud by 2023.

James claims the bank is blaming customers who fall victim to online scams, instead of securing their accounts and not reimbursing losses when required by law. Her complaint cites claims from clients in New York, including one who had $40,000 stolen from a retirement account after clicking a link in a text message that looked like it came from Citi.

No authorization

Christopher Filburn, a state attorney, told Oetken that the case is about what happens when money disappears from a consumer’s bank account without instructions or permission from them — and sometimes without their knowledge. The state wants the bank to make public all customer claims it has rejected over the past six years for lost money in connection with payment orders and direct debit authorizations.

“We’ve heard from consumer after consumer” since the lawsuit was filed, Filburn said.

But Strickland said the state’s requirements would result in a “dramatic shift” in how payments are processed. She argued that major banks use multi-factor authentication and multiple layers of fraud detection to stop scams, and that James’ office is “well aware that Citi is monitoring this issue.”

The bank claims that the EVA monitors electronically initiated fund transfers by consumers, including ATM transactions, but not bank transfers. Citibank says it is not responsible for losses as long as it follows reasonable security procedures to verify customers’ identities.

“Banks have a strong incentive to stay aware of scams,” Strickland said, noting that the number of fraudulent payments that occur is “minuscule” compared to the volume of legitimate transfers processed annually. “The idea that some scams are getting through is unfortunate, it is happening.”

As criminals “become more and more sophisticated” and banking processes evolve to catch them, Strickland says many fraudulent transfers occur because consumers share personal information with scammers.

“That’s not a Citi issue,” she said. “It’s a consumer problem. It’s a shame.”

The case is New York v. Citibank NA, 24-cv-00659, US District Court, Southern District of New York (Manhattan).

First publication: Oct 9, 2024 | 9:16 am IST