What's up guys and welcome back to wall street millennial credit card fraud is a rapidly growing problem around the world. According to data from the nelson report and reported by pr newswire total credit card fraud losses reached nearly 30 billion dollars globally in 2018., as a percentage of total credit card transaction amounts, fraud has remained steady around 6 cents per 100 of volume, but the total amount Of value of these frauds has increased with the annual increases in total credit card usage, and those numbers only include fraud, losses incurred by credit card issuers and merchants and merchant acquirers. The total losses incurred by credit card holders, either unnoticed or not reported, is likely to increase those numbers. Much higher.

Most credit card fraud arises when criminals illegally gain access to customer accounts, either by stealing credit card numbers or using personally identifying information to open fraudulent credit card accounts in the names of the victims. Credit card numbers can be stolen in any number of different ways. From a waiter memorizing your credit card, when you pay your bill at a restaurant or an online shop that you once paid using a credit card getting hacked in these cases, the perpetrators are usually individuals or small groups of individuals perpetrating fraud on a relatively small scale. But every once in a while authorities uncover wide-scale credit card fraud carried out by sophisticated organizations or even entire corporations, and sometimes the perpetrators are who you least expect sitting in broad daylight.

In 2008, a bombshell settlement was announced for a multi-million dollar credit card fraud operation with the defendant named as the biggest us bank at the time by assets citigroup, they ended up paying out 14 million dollars to sell the case outside of court with the california attorney General edmund brown, the settlement included paying back the victims with interest, as well as millions in fines to the state of california. In this video we'll go over what the fraud was just how wide-ranging it was and what happened to citigroup after it was uncovered. Imagine that you wake up one day brush your teeth, eat breakfast and pay off a bill for your credit card before heading off to work at some point during the day, you remember that you already paid that bill yesterday, but forgot. So you check your credit card account expecting to either see that double payment show up as a credit towards your next bill or to see that money return to the account you paid it with.

Instead, the money seems to be gone. You look everywhere search google for what happened and perhaps even try to call customer service to try to get that money back, but after wasting countless hours trying to figure out where your money went, you finally realize that searching has been entirely in vain. You are the victim of one of the most shameless credit card frauds in recent history. That money has been taken from your account and deposited in citibank's general company accounts.

Citigroup is an enormous investment bank, headquartered in new york, with a long history going back more than 200 years. It had its start in 1812, as citibank of new york and quickly became one of the largest banks in the u.s throughout the 1800s and 1900s. It became one of the premier, commercial and investment banks in the world in the 1980s and 90s under ceo, john reed city was one of the pioneer banks in the credit card industry by the end of the 20th century. City had become both the largest u.s bank.

By assets and the largest credit card issuer 200 years in business had led to booming profits for city by 2006. City was reporting all-time high corporate profits of nearly 28 billion dollars a year. A significant portion of their profits and growth came from their credit card business, which they cited in their fourth quarter: 2005 earnings press release as one of the major growth and profit centers of the company business was looking good for city, some might say even too good When ceo john s, reed was elected in 1984, he instilled a fierce ambition within city to grow its consumer loan in credit card businesses. He was largely responsible for pushing the adoption of the atm by city, especially internationally.

This helped advance both the company and the finance industry by speeding up the adoption of new ways to pay for things. However, city also ended up developing an intense profit-driven corporate culture within its consumer banking division, which sometimes incentivize unethical or even illicit behavior in 2008. The attorney general of california, edmund brown, announced a settlement with citibank for a massive fraud related to its handling of its customers. Credit card accounts, according to the attorney general citi, had been using an account sweeping program to illegally take millions of dollars out of its own customers.

Credit card accounts over the course of more than a decade from 1992, through 2003 city used an automated process to go through the electronic records of its clients, credit card accounts and remove positive or credit balances from the accounts of certain customers. The money was taken out of customer accounts, with no notice to the account holders and regardless of whether the customers actually owed the bank, any money in a press release. The attorney general said city quote: knowingly stole from its customers, mostly poor people in the recently deceased. When it designed and implemented the sweeps when a whistleblower uncovered the scam and brought it to his superiors, they buried the information and continued the illegal practice.

Obviously, this is a shocking accusation against the american bank, in addition to stealing money from its customers, a whistleblower employee of the company was fired in july of 2001. After discussing the practice with an internal audit team in the attorney general's investigation of the case, they also found that a high up at city had said that stealing from their customers was a business decision, not a legal decision. They also found that the same executive later said that they should not stop the practice, because that would reduce the bonuses that city paid to its high ranking employees. There are few details publicly available about the exact results of the attorney general's investigation, but some important pieces of information can be found in the legal settlement between city and the state of california.

Apparently city would transfer money out of their customers accounts. If there were net credits on the accounts to the customer, for example, this could happen if the customer double paid a bill by accident or got a refund at a store for a returned item with the refund going back to the credit card. If the account had a net credit and also satisfied some other conditions, citi's automatic suite program would take the money from the account and put it in the city's own company accounts. The main condition that led to a credit card account being swept of its positive credit is if the account was in what is called recovery status.

That includes accounts where the customer has died. Filed for bankruptcy, has unpaid bills or has been sued for another reason by city. In these cases, legally city cannot simply take all the money from these people's accounts. However, they did so anyway without any regard for whether or not the money should rightfully be in the possession of city.

In some cases, city would be justified for taking money from an account. For example, if there are unpaid bills, but the automatic sweep system had no mechanism for determining whether or not the money should be taken and instead was said to always remove all the money from the customer's accounts over the course of more than a decade, it was Found that the total amount of money that city wrongfully took from these customer accounts was in excess of 14 million dollars and victimized about 53 000 different customers, clearly based on the attitudes of the executives at city, as well as the whistleblowers uncovering of the scam. The practice was known to city to be illegal and they kept doing it anyway. In the end, city agreed to pay back the 14 million dollars that they stole from the customers plus 10 interest per year.

Since the money was taken, they also agreed to pay three and a half million dollars in fines to california, although the scam was uncovered by the california attorney general. The total magnitude of this camp was tiny in the grand scheme of things. It was not big enough for the justice department, the sec or any other of the major federal regulators to get involved in 14 million dollars. Although significant for the 55 000 victims is just a drop in the bucket for city and for the finance industry in general.

In a single quarter, in 2005 city made nearly 7 billion dollars, that's 2 000 times more than the amount of the fine levied against them, meaning that they made enough money to pay off that fine 30 times each business day. This just goes to show that these wall street mega banks are not afraid of the legal system in the united states every year. There are multiple major scandals like this one that get uncovered with no big bank innocent from the backlog of scandals. Usually, the most significant outcome is a small fine from the regulators which the banks brush off and continue with the next fraud.

What's shocking about this particular one is the blatancy with which city engage in the activity of criminals. The high ups within the company felt no shame at victimizing their own customers and collecting huge bonuses. As a result, when the only thing the authorities do is hit them with a fine equal to a rounding error off their corporate profits, it's no wonder why they keep doing it. Alright, guys that wraps it up for this video.

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