Japan today ordered the commercial banking unit of Citigroup to close its Japanese private banking offices.
The Financial Services Agency (FSA) ordered Citibank to suspend operations at a branch in Tokyo and three satellite offices in Osaka, Nagoya and Fukuoka as of September 29th.
Citibank then has one year to terminate accounts at the offices, at which point their licenses will be revoked.
The bank may apply for new licenses to continue its private banking operations at other locations, but the punishment effectively forces it out of the industry in Japan.
Regulators said they had found a long list of problems at the private banking operation, including failing to prevent suspected money laundering, lax screening of customer information and improper trading practises.
Citigroup apologised and said it would submit a comprehensive plan to tighten its operations by October 22nd. It said six officers had left the company over the problems, while eight have had their pay cut and others have been reprimanded.
"Citibank Japan sincerely apologises for the problems identified in the FSA orders and is earnestly addressing the issues raised and working to prevent their recurrence," the company said in a statement.
The punishment is the latest blow to Citigroup's international brand.
Officials at its European operation expressed regret earlier this week over a widely criticised €11 billion trade in government debt in early August, which threw the bond market into turmoil while garnering an estimated €10 to €30 million profit for the bank.
Just three months ago, the FSA ordered Citibank to tighten its operations after it lost details of customers' accounts.
More recently, the Securities and Exchange Surveillance Commission, Japan's markets watchdog, said on Tuesday that Citibank had misled clients in a series of private bond placements last year.