How could this have happened? Gary Foster--until recently the vice president of Citigroup's Treasury finance department--has been arrested at Kennedy International Airport and charged with embezzlement as he returned from a trip abroad.

According to TheStreet.com, between July 2010 and December 2010, Foster, 35, allegedly caused approximately $900,000 to be moved from Citigroup's interest expense account and approximately $14.4 million from Citigroup's debt adjustment account to the bank's cash account. He then caused the money to be wired out of Citigroup's cash account to his personal account at another bank in eight separate wire transfers.

Foster allegedly tried to create the appearance of propriety by concocting fake contract numbers that were input into systems. Obviously, his knowledge of bank operations was extreme. And yet you have to wonder if Citigroup perhaps made some compliance missteps. This immediately calls to mind the idea of segregation of duties and why they were structured so as to give one person this kind of leeway. You also wonder how this was uncovered. In any case, this raises some troubling issues for Citigroup, which--at a minimum--needs to revisit controls.

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