09:12 AM EDT, 04/03/2024 (MT Newswires) -- Citigroup's ( C ) Citibank unit is seeking the dismissal of a lawsuit filed by New York Attorney General Letitia James that accuses it of failing to reimburse customers defrauded online, according to a court filing Tuesday.

James' office filed the lawsuit against Citibank in January, alleging security system failures that enabled scammers to steal from customers.

Citibank on Tuesday argued that federal law covering electronic fund transfers exempts banks if they adopt reasonable security measures, according to the bank's filing with the US District Court for the Southern District of New York.

James' office argued the Electronic Fund Transfer Act applies and consumers should be reimbursed for fraudulent transactions, Citibank said, claiming that the EFTA applies only to certain electronic transfers, and wire transfers are exempt.

"Under this exemption, if a consumer agrees that an internal debit will occur 'automatically on the occurrence of certain events' -- say, a payment every month when a mortgage payment is due -- the EFTA does not apply," Citibank said in the filing.

Citibank said that no system can identify all scams, especially those where consumers were the victims of phishing scams or divulged security information to scammers.

"The solution to the problem of online wire fraud and scams is not a lawsuit, especially one that improperly seeks to rewrite a federal statute and that would abruptly and dramatically upset how banks have organized their policies and practices for decades," Citibank said in the filing.

James' office did not immediately respond to a request for comment by MT Newswires.

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