Earlier quoted context omitted.
At least Citibank is trying to upgrade their ancient systems, but it sure looks as if previous or current CEOs failed to exercise due diligence. Doesn't look like good risk management at all.
Actually, banks risk management is easy. Most in-bank or between banks transfers are reversible and usually a non-issue. That why the risk management probably says something like this: Risk: Incorrect transfer of funds to customer in another bank Mitigation: Manual review of all funds transfer above 5 million dollars Mitigation: Besides litigation issues, lost funds are easily recovered by asking the receiving bank S…
For any other payment system for larger sums / corporate and institutional parties, settlement finality is a huge thing that is the subject of all sorts of specific legislation, as it would be a real issue for the health of the financial system if a settled payment can simply be reversed, as it would have a lot of unintended consequences further down the line. So banks actually do have strict risk management policies to avoid wrong payments, but there are so many complex transactions for which ultimately a human (actually at least 2 due to 4-eyes principles) must confirm whether conditions for payment are satisfied and whether payment details are correct, and humans are always prone to making mistakes once in a while.