Citibank lost $500 million due to a confused interface in Oracle software

2021: Citibank lost $500 million due to confusing Oracle Flexcube interface

In mid-February 2021, it became known that Citibank accused the Oracle banking program with a confused user interface of an error that cost the company $500 million. Due to a verification error, the bank sent almost a billion dollars to repay the loan instead of just $7.8 million. At the same time, the judge ruled that creditors are not required to return payments that Citibank made by mistake.

In August 2020, the bank tried to pay $7.8 million in interest on behalf of, Revlon but the subcontractor in India the transaction mistakenly transferred $900 million. The reason was the overly complicated use process - ON Flexcube one of the parts of Oracle Banking Suite software. The subcontractor incorrectly filled out the user interface, and a huge amount went to the creditors. Although Citibank requires such large transactions to be signed by three people, no one has any suspicions.

Citibank lost $500 million due to a confused interface in Oracle Flexcube

Citibank turned to creditors and was able to return about $400 million, but many refused to return the funds mistakenly sent to them. Bloomberg reports that Revlon's debt is bidding at only 42 cents per dollar, and many of the lenders were unwilling to re-take risk.

Citibank filed a lawsuit to force creditors to return the funds, but a district court judge rejected the bank's request. As a rule, in such cases, the law is on the side of the bank, since it made a payment in error. However, in New York law there is an exception: if the recipient of the bank transfer is entitled to the money sent and did not know that the funds were sent in error, he does not need to return the transaction. Revlon lenders claim that they did not know about the overpayment and could not assume that Citibank was capable of such a mistake. The court agreed with them.^[1]

2020: The reason for the erroneous transfer of $900 million to creditors of cosmetic giant Revlon is a human error

At the end of August 2020, it became known that the human factor was the reason for the erroneous payment of $900 million by the American bank Citigroup to Revlon creditors. The bank intends to return the funds.

According to Citigroup, an erroneous transfer of the entire amount of funds along with accrued interest on the loan earlier in August 2020 was made due to the fault of an employee who did not manually select the correct system parameters in the software.

The American maker of cosmetics and perfumes Revlon is in conflict with creditors who granted it a loan in 2016. Lenders include large companies such as Brigade Capital Management LP, HPS Investment Partners LLC. As part of the trial, Citigroup has already managed to return hundreds of millions of dollars. However, there are creditors who refuse to return the funds, the American bank still cannot provide a detailed explanation of the incident.

Citigroup named the reason for the erroneous transfer of $900 million to creditors of cosmetic giant Revlon - the human factor

Citigroup said in a statement:

Unfortunately, manual validation of the selected parameters also failed to detect an error. Citibank concluded that incorrect payments were the result of human error.

The bank noted that it had introduced "significant additional control measures."

We are proud of our role as a world leader in the field of financial services and recognize that an operational error of this kind is unacceptable, "Citigroup said in a statement.

Citigroup acted as Revlon's loan agent, raising funds from the company and distributing them to creditors. The company said it intended to pay interest on behalf of Revlon, but accidentally transferred an amount from its accounts that is 100 times the required amount.^[2]

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