Sent from BlackBerry® on phone network. Ronald's EmaiL -----Original Message----- From: MeLinda MeLisa <[email protected]> Sender: [email protected] Date: Fri, 8 Apr 2011 08:21:02 To: <[email protected]> Reply-To: [email protected] Subject: [StockForex] Citigroup Under Pressure in Indonesia Citigroup Under Pressure in Indonesia April 08, 2011 - http://www.marketcall.net A senior Indonesian lawmaker called for penalties against Citigroup Inc. as it grapples with allegations that a local employee embezzled millions of dollars from customers, as well as questions about its debt-collection practices. Speaking to reporters in Jakarta on Thursday, Emir Moeis, chairman of the parliamentary committee overseeing the financial sector in Southeast Asia's most populous country, said the central bank should impose "stern actions" on Citigroup, "ranging from freezing its credit-card business to revoking its entire license in the country depending on the degree of violations it has committed." Bank Indonesia has already ordered Citibank, the largest foreign bank by assets in the country, not to accept new clients for its Citigold wealth management unit after a staff member, Inong Malinda Dee, was detained by police on March 23 on charges of stealing at least 17 billion rupiah ($2 million) from clients after obtaining signed blank checks from clients. Citi detected the problem in February, and the current investigation shows the fraud dates back to December. Police also seized expensive cars in Ms. Dee's possession. Efforts to reach Ms. Dee were unsuccessful. Ditta Amahorseya, head of Citi's country corporate affairs in Indonesia, said in a statement prepared for testimony before parliament that the halt on accepting new customers is "temporary" and that it has "no impact on the service we offer our existing Citigold customers." A Citigroup spokesman said the bank has "identified some suspicious transactions conducted by a Relationship Manager at our Landmark Branch and immediately informed local regulators and the Police." It has "contacted those who may have been impacted by the fraud, and will work with them to "address any losses in their accounts." The allegations made against Citi come at a time when Indonesia, with its rapidly growing middle class, is increasing in importance to foreign banks. The Citigold business in which the fraud took place targets Asia's emerging affluent market, generally defined as those with between $10,000 to $100,000 in assets. In Indonesia, Citi's Citigold clients have $50,000 or more in investible assets. Citigroup's consumer unit in Asia generated $2.1 billion in net profit in 2010, up 52% from a year earlier, and was the largest regional contribution to consumer banking globally, according to the company. In a parliamentary hearing on Wednesday, Bank Indonesia governor Darmin Nasution said he wouldn't rule out more "severe sanctions" if more wrongdoings are discovered. Indonesian police are simultaneously conducting an investigation into the death of a Citibank client, who died last week after meeting with debt collectors contracted by Citi at a Citibank branch in Jakarta. The man, Irzen Octa, was the secretary-general of the National Unity Party, a small party in Indonesian politics. The exact circumstances of the man's death are unclear. That resulted in Bank Indonesia ordering Citigroup not to add any new credit-card customers. A spokesman for the Jakarta police, Baharudin Jafar, said four suspects have been named and three detained as part of the investigation, which the police are treating as a "criminal one." The police are investigating the relationship between Citibank and the debt collectors, he said. On Wednesday, Citi's country manager for Indonesia, Shariq Mukhtar, told parliament that the bank was "deeply saddened and shocked by the unexpected passing" of Mr. Octa, and that Citi is "working very hard to understand" what happened when Mr. Octa visited the bank branch on March 29 Mr. Mukhtar said Citi didn't believe "anyone physically harmed Mr. Octa" in their offices. In discussing the bank's debt-collection practices, he said Citi has "strong controls and robust processes to ensure we satisfy all local legal and regulatory requirements regarding debt collection." Mr. Moeis, the parliamentarian, said he has ordered Bank Indonesia to ban debt-collecting outsourcing. "Debt collection must be part of the banks." This isn't the first time Citigroup's internal controls have been called into question with regard to customer accounts in Asia. In 2010, Citigroup identified a $67 million investment fraud at one of its Indian branches. The customer in that case filed an official complaint against Citigroup, that prompted a police investigation, which was later withdrawn. Citigroup said at the time the claims in the case against senior executives were "completely without basis and we intend to contest them vigorously." The case remains open. In Hong Kong in 2009, Citi found in a probe that a financial adviser had duped seven investors in what was effectively a Ponzi scheme, with losses estimated at about $1.7 million. At the time, a bank spokesman described the episode as an "isolated incident." Police are seeking the financial adviser, who has left the country. - Alison Tudor and Yayu Yuniar contributed to this article - Wall Street Journal
