Indonesia bars Citi from opening new branches for 1 year

Indonesia's central bank has barred Citigroup from opening new branches in that country for one year besides slapping a slew of sanctions amid findings that the global banking major has violated various regulations in the country.

The latest sanctions by Bank Indonesia come at a time when Citi's Indonesian operations are plagued by allegations of fund embezzlement by an employee to the tune of millions of dollars.

According to media reports, the apex bank might even revoke Citi's licence to do business in Indonesia if more violations are found during the probe.

"As a follow-up measure to the problems plaguing Citibank associated with priority services (Citigold)and credit cards, Bank Indonesia conducted a special audit to confirm violations of prevailing regulations. The investigation unearthed violations of internal bank regulations and exposed weaknesses in the application of risk management," the central bank has said.

Bank Indonesia has refrained Citi from opening new branch offices for one year. Besides, the central bank also barred Citi from issuing credit card to new customers for two years and prohibited the use of credit card billing services by third parties for two years.

"The sanctions are effective as of May 6, 2011 and will be reviewed if at a later date, more serious violations are uncovered," Bank Indonesia has said.

The sanctions will hit the expansion of Citi's business in Southeast Asia's biggest economy.

Bank Indonesia also ordered Citi to dismiss non-executive employees who are directly involved in the wealth management and credit-card services.

Recently, a fraud perpetrated by a senior employee of a Citibank branch in Gurgaon came into the light wherein customers were duped of wealth worth about $100 million.

A string of bad news started for Citi this year. In one incident, a customer died in March following meetings with company debt collectors. In the other, one of the bank's relationship managers allegedly stole 16 billion rupiah ($2 million) from three clients in 2009 and 2010.