The American regulator (Federal Reserve and OCC – Office of the Comptroller of the Currency) calls them “near misses” because they are errors made within the payment system that are, however, detected and corrected at some stage in the various control systems.
However, what happened to Citi Bank last April (yes, you read that correctly: April 2024! Almost a year ago) is alarming. First, due to the amount of the error: 81 trillion dollars! Second, due to the delay in disclosing such a serious (in the sense of weighty) piece of news.
For the latter, there is an explanation that, far from being reassuring, should throw us into panic. Since “near misses” are errors that are corrected, they do not have to be reported to the regulator. According to the Financial Times, which reviewed an internal Citi report, there were 10 near misses exceeding one billion dollars in 2024, and the previous year, there were 13. No further comments seem necessary in light of these figures: fortunately, these incidents were avoided, but precisely for this reason, a regulator should be informed so it can assess the severity of the problem with the bank and take the necessary actions to reduce the frequency and harmfulness of these events. Because one thing is certain: sooner or later, these errors will slip through the safety net and then become a serious problem. If a regulator does not oversee these aspects, what is its purpose?
Now, let’s address the issue of the amounts. How is it possible that a $280 transaction turned into $81,000,000,000,000? It appears to have been caused by a poorly designed graphical interface. Essentially, in mid-March (of 2024, let’s emphasize that again), $280 was transferred to an escrow account held by a bank client. However, for various reasons, the transaction was blocked by the internal control system. After verification, to unlock the fund transfer, a bank employee had to use a backup interface that pre-filled the amount field with 15 zeros. In short, a human error (and poor design of the management software), which seemed to have bypassed the first two lines of defense but was detected by the third and subsequently corrected.
This brings to mind the Bybit case we reported in our post on Monday, February 24: a human error repeated by three people that had disastrous consequences for the Dubai-based crypto exchange. Of course, the two incidents are entirely different in every aspect except for the origin of the error itself. We imagine that this incident will spark reactions from the digital community advocating for blockchain over traditional payment systems. We have already seen numerous posts praising the way Bybit handled the event—with transparency in communication and prompt recovery strategies. Controversies aside, we are interested in the problems, and we believe this case raises many, particularly regarding the quality of oversight by authorities that are supervised but should, in turn, be well-supervised.
Disclaimer: This article reflects the personal opinion of the Custodia Wealth Management collaborators who authored it. It does not constitute investment advice, personalized consulting, nor should it be considered as an invitation to conduct transactions on financial instruments.
