Citigroup’s Mexican Operations Under Wider Scrutiny For Possible Money Laundering
Citigroup’s headache over inquires into its Mexican subsidiaries Banamex and Banamex USA’s alleged lax compliance with U.S. federal anti-money-laundering rules just got worse. Last week, the Department of Justice expanded its money-laundering probe of Banamex, Bloomberg reported on Friday.
In January, the Department of Justice issued a subpoena to Banamex, demanding information about its anti-money-laundering controls and seeking documents about its due diligence on operations involving hundreds of clients, Bloomberg said.
Peter Carr, a spokesperson for U.S. Department of Justice, declined to comment.
Molly Meiners, spokesperson for Citigroup, also declined to comment. Instead she pointed me to the disclosure on page 296 of Citigroup’s 2014 10-K related to money laundering inquiries.
The 2014 10-K, published in March, says that Citigroup and related parties, including Citigroup’s indirect, wholly-owned subsidiary Banamex USA, “have received grand jury subpoenas issued by the U.S. Attorney’s Office for the District of Massachusetts concerning, among other issues, policies, procedures and activities related to compliance with Bank Secrecy Act (BSA) and anti-money laundering (AML) requirements under applicable federal laws and banking regulations.”
Banamex USA, Citigroup further disclosed, also has received a subpoena from the FDIC related to its BSA and AML compliance program. Both Citigroup and Banamex USA have also received inquiries and requests for information from other regulators, including the Financial Crimes Enforcement Network and the California Department of Business Oversight, concerning BSA- and AML-related issues, the report goes on. Citigroup said it is cooperating fully with these inquiries.
Mexico, home to the world’s most powerful and profitable drug cartels, has been under the scrutiny of U.S. banking regulators for some years. Some bankers say Mexican banks are believed to launder around $10 billion a year.
Reports on the widening of the probe emerged three days after Citigroup announced that it was closing down Banamex USA operations and paying $140 million in fines to the Federal Deposit Insurance Corporation (FDIC) and the California Department of Business Oversight, over identified deficiencies in Banamex USA’s compliance of its anti-money-laundering regulations.
Banamex USA has three branches, down from 11 a few years ago. It plans to close down the Houston and San Antonio branches in October. Its Los Angeles branch, the bank’s headquarters, will remain open through the wind-down process.
Citigroup spokesperson Meiners told me that the announcement is not connected to the Department of Justice probe, but rather to the probes by the FDIC and the California Department of Business Oversight.
In 2012, the FDIC and the California Department of Business Oversight filed a consent order against Banamex USA, telling it to beef up staff and systems designed to detect dirty money, but regulators told The Wall Street Journal on July 22 Banamex USA hadn’t done enough to comply with the order.
“Three years ago Banamex USA made a commitment to correct numerous weaknesses in its anti-money-laundering program,” Tom Dresslar, spokesman for the California regulatory agency, told the Journal. Dresslar said that over time the agency found “serious, sometimes new, problems.”
The past year and-a-half has been tough for Citigroup’s operations in Mexico, the bank’s second largest market outside the U.S. and one of its most prized assets. In February 2014, Citigroup revealed that it had uncovered a $400 million fraud in Banamex in connection with a Mexican oil services provider.
