Bank Indonesia, the country’s central bank, has imposed a one-year ban on the wealth operations of Citibank, effective from 6 May, which curtails the firm's launch of any new branches and prohibits it from acquiring new Citigold customers for this period. The ban does not include Citi Private Bank, WealthBriefing understands.

Earlier this month the bank ordered 23 banks to cease from dealing with wealthy clients for a month while investigations into the alleged embezzlement at Citibank Indonesia's wealth unit took place.

As a follow-up measure to the problems associated with priority services (Citigold) and credit cards, Bank Indonesia conducted a special audit to confirm violations of prevailing regulations, an investigation which is said to have unearthed violations of internal bank regulations and exposed weaknesses in the application of risk management, the central bank said in a statement posted on the Bank Indonesia website.

Consequently the following actions were decided at the Bank Indonesia board of governors’ meeting on 6 May 2011: imposing sanctions on Citibank consisting of prohibiting the acquisition of new Citigold customers for one year; suspending credit card issuances to new customers for two years; and prohibiting the use of credit card billing services by third parties for two years.

The sanctions will be reviewed if, at a later date, more serious violations are uncovered, the statement said.

Citibank was also instructed to dismiss employees working under executives directly involved with the Citigold priority service and credit cards.

Alongside refraining from opening new branch offices Citibank was instructed to: enhance its implementation of risk management and internal control; undertake corrective actions in accordance with the results of the audit, and immediately communicate the outcome to Bank Indonesia.

Bank Indonesia also requested Citibank’s head office in New York to evaluate the internal control function of Citibank Jakarta as a whole.

A spokesperson from Citibank told WealthBriefing “We are committed to working closely with Bank Indonesia and taking the actions necessary to satisfy their concerns. We have already taken steps to strengthen our internal control processes. We have also hired 1,400 new staff to bring our collections process in-house. We will continue to implement the appropriate corrective actions in consultation with our regulator."