NEW YORK, April 2 (Reuters) - Citigroup ( C/PN ) on Tuesday

urged a federal judge to dismiss New York Attorney General

Letitia James' lawsuit accusing its Citibank unit of failing to

reimburse customers who fall victim to online scammers.

While recognizing that the problem of online wire fraud "is

real," the third-largest U.S. bank faulted James' "misguided"

effort to hold it liable under a federal law governing

electronic fund transfers because it expressly excludes wire

transfers.

Citigroup ( C/PN ) said the proper standard from the Uniform

Commercial Code, which all U.S. states use, excuses banks from

covering losses if in good faith they adopt commercially

reasonable security measures to verify customer identities.

The New York-based bank said it has done so, and stops

"countless" fraudulent transactions each day.

"No system will catch every scam every time," but the

solution is not a lawsuit that would "abruptly and dramatically

upset how banks have organized their policies and practices for

decades," Citigroup ( C/PN ) said in a filing in Manhattan federal court.

James' office did not immediately respond to a request for

comment.

The attorney general sued Citibank in January.

She said the failure of its security systems to effectively

investigate red flags such as using unrecognized devices,

changing user names and passwords, and "phishing" enabled

scammers to steal millions of dollars.

In one instance, a customer allegedly lost $40,000 of

retirement savings after clicking a link in a text message that

appeared to be from Citibank.

James also accused Citibank of coercing victims into signing

affidavits that purported to narrow their ability to recoup

losses, and then summarily rejected reimbursement claims.

The attorney general wants Citibank to pay back defrauded

New Yorkers, pay a $5,000 civil fine per violation, and appoint

an outside monitor to review bank records and locate victims.

The case is New York v Citibank NA, U.S. District Court,

Southern District of New York, No. 24-00659.