NEW YORK (

TheStreet

) --

Citigroup

(C) - Get Report

will pay $600,000 to settle a claim by the Financial Industry Regulatory Authority that the bank inadequately supervised transactions that helped international customers avoid U.S taxes on stock dividends, reports say.

Finra found Citigroup Global Markets failed to supervise the system of trades and swap contracts and inadequately monitored certain communications,

Bloomberg

reports, citing a person familiar with the matter.

Under the system, an overseas client sold U.S shares to Citigroup before dividends were paid. The bank later received an amount similar to the dividend through a derivative contract, Finra found,

Bloomberg

reports. Citigroup initially lacked written procedures to oversee the system, and after the bank adopted a policy, employees didn't always follow it.

Last year, a U.S Senate inquiry found that Wall Street firms invented imaginary derivatives and stock loan deals to help clients including international hedge funds avoid huge amount of taxes,

Bloomberg

noted. Citigroup voluntarily disclosed such deals and paid $24 million in taxes for 2003 through 2005 as it was aware that the Internal Revenue Service might deem the transactions improper.

The

Financial Times

first reported the news over the weekend.

This article was written by a staff member of TheStreet.com.