Citigroup Inc has been fined $600,000 by the Financial Industry Regulatory Authority over failing to police derivatives transactions that helped foreign clients avoid taxes on dividends.

FINRA, a private-sector regulator of U.S. broker dealers, said Citi failed to supervise and control trading strategies designed partly to evade taxes.

One trading strategy involved Citi buying stock from a foreign broker-dealer customer, selling it back to them and after a series of interim steps including using swaps, Citi's foreign clients would receive dividends free of withholding taxes, according to FINRA.

This practice occurred from 2002 to 2005, the regulator said.

A bank spokeswoman said Citi is pleased to have the matter resolved. In agreeing to the deal, Citi neither admitted nor denied the charges, according to FINRA.

Citigroup paid about $24 million to U.S. tax authorities in 2006 and earlier for using this strategy, FINRA said.

The development comes as governments around the world crack down on tax evasion as they look to close widening budget gaps fueled by economic weakness.

(Reporting by Kim Dixon, editing by Matthew Lewis)