Citi has been ordered to overhaul its risk management systems by Japan's Financial Services Agency, which has sanctioned the US bank for the way it has tried to sell investment products to retail customers.
The FSA says it has found "many cases" of violation of laws and regulations by the bank, including "inappropriate solicitation of customers and inappropriate sales of investment products".
Citi has been ordered to stop proactive solicitation related to "risky assets" such as foreign currency denominated deposits for a month at the beginning of next year.
In addition to suspect solicitation, the bank has frequently suffered from system failures that affected customers, says the FSA and has inadequately managed outsourcing contractors "indicating that the information technology risk management system is not adequately functioning".
It has been told to "drastically restructure" internal control systems and risk management technology as well as carry out a review of how it manages outsourcing contractors.
The FSA has given Citi until the end of January to submit a business improvement plan, which the bank has promised to do, insisting it takes the action "very seriously and sincerely apologizes to its customers and all other concerned parties".
In a separate sanction, the FSA has ordered the temporary suspension of derivative products related to Tibor and Libor at Citi's global markets division after staff were accused of trying to influence interbank lending rates. Swiss bank UBS has also been sanctioned for a similar issue.
Citi, which has been on the wrong side of the FSA several times in recent years, has responded to the double hit by announcing the resignation of its boss in Japan, Darren Buckley. He will be replaced on an interim basis by Peter Eliot, who currently serves as Citi's country head in Thailand.