JAKARTA, Indonesia — The private banker at the center of an embezzlement scandal involving Citigroup in Indonesia was convicted of fraud Wednesday in a case that dealt a blow to the US bank’s expansion in Southeast Asia’s largest economy.
A Jakarta court convicted Inong Malinda Dee, 50, of stealing $4.4 million from clients and sentenced her to eight years in prison. She was also ordered to pay a fine of $1.1 million.
“The defendant was found guilty of receiving money through 117 illegal transactions,” according to South Jakarta District Court Judge Gusrizal, who like many Indonesians goes by one name. Prosecutors sought 13 years for Dee, who denied the charges.
Dee was a relationship manager for the Citigold wealth-management unit when she was arrested in March last year and charged with stealing from clients after persuading them to give her signed blank checks. Prosecutors said she used the money for property, plastic surgery and expensive cars, including two Ferraris, a Hummer, a Mercedes and a Porsche.
The Indonesian central bank and police launched probes into Citi’s operations after it alerted regulators to suspicious transactions conducted by Dee.
In a statement, Citi, the largest foreign bank by assets in Indonesia, said it welcomed the court’s decision and that customers have been compensated for their losses.
“We have also further strengthened our internal controls to protect customers against fraudulent activities. Indonesia is an important market for Citi globally, and our focus remains on delivering the best service and products to our retail and institutional clients,” the statement said Wednesday.
Before the scandal, which prompted restrictions on Citi in Indonesia, the US bank had more than 4,000 employees and 20 branches, with estimated revenue of $300 million.
The crackdown on Citi illustrated the risks of expansion into emerging markets, where there may be less control over far-flung branches, analysts said. More than half of revenues and profits at Citi’s core banking operations come from outside the US.
When the fraud came to light, the Indonesian central bank banned 23 banks from acquiring new customers for their wealth-management services. It lifted that ban in June. It also barred Citi from issuing new credit cards for two years in the country, and from opening new branches for one year.
To read more, go to The Wall Street Journal