It's not quite as clear as that. Citi is aware of this deficiency and could take reasonably easy steps to prevent it. But they have tacitly decided that up to 2 similar applications is fine with them.

This is similar to their previous "rule" that a person becomes a "new" cardmember after 6 months. Now it's more like 18+ months.

All of these parameters are within their control and they have chosen not to more strictly enforce them.