NEW YORK, Sept 27 (Reuters) -

Citigroup warned some employees about fraud and unethical behavior and said it is considering tighter scrutiny on work done by contractors to ensure the company is billed accurately, according to a memo seen by Reuters on Friday.

Citi has struggled to fix weaknesses in its controls and risk management. It was fined $136 million by regulators in July for making insufficient progress on regulatory punishments dating back to 2020.

"Citi has zero tolerance for fraudulent and unethical behavior from our employees, non-employees and suppliers," according to the internal Citi memo seen by Reuters.

“Citi is looking at heightening our controls on how we source work," to ensure suppliers match its needs and that they are paid appropriate rates for the hours they work, the memo showed.

The bank declined to comment, and the memo provided no specific details on why it was being sent.

The memo was sent by Scott Sigal, Citi's global head of procurement and third party management, and Erika Federico, its global head of non-employee staffing.

The lender also asked staff to report any potential misconduct or breaches of its policies. Suspected misuse of Citi resources for personal or professional gain would be investigated, it said.

(Reporting by Tatiana Bautzer, additional reporting by Elisa Martinuzzi, editing by Lananh Nguyen and Chizu Nomiyama)

((tatiana.bautzer@tr.com; Mob: +1-646-2397968; Reuters Messaging: tatiana.bautzer.thomsonreuters.com@reuters.net))