The Department of Justice on Monday said a Citi subsidiary, Banamex USA, had “wilfully” failed to maintain effective controls and identified breaches over a five-year period to 2012.
The so-called non-prosecution agreement ends a long-running criminal investigation into the bank’s California-based subsidiary, which at one time operated about a dozen branches near the border with Mexico.
It is the latest in a series of actions that regulators have taken against banks for falling foul of anti money-laundering (AML) rules. Earlier this year Deutsche Bank paid a $425m fine for its role in a scheme that allegedly laundered $10bn out of Russia.
Lawyers and bankers caution that President Donald Trump is likely to maintain tough AML standards, despite his broader deregulatory push.
Matthew Schwartz, partner at Boies Schiller Flexner, said the Banamex development on Monday showed that the DoJ remained committed to bringing such cases, and that banks needed to “devote sufficient resources” to AML compliance.
As part of the agreement between Citi and the authorities, Banamex USA acknowledged it conducted fewer than 10 investigations and filed only nine so-called suspicious activity reports — even though its monitoring system identified more than 18,000 transactions as “potentially suspicious” during the period.
Banamex USA “understood the need to enhance its anti-money laundering efforts, yet failed to make necessary improvements to its transaction monitoring controls or to add staffing resources”, the justice department said.
It follows a $140m penalty from the Federal Deposit Insurance Corporation almost two years ago, which prompted the bank to set out plans to shut down the 300-employee operation.
The Drug Enforcement Administration and the Internal Revenue Service were also involved in investigating the case.
In March, the FDIC disclosed it had taken enforcement actions against four executives at the division relating to violations of the Bank Secrecy Act (BSA). The individuals involved were variously fined and/or prohibited from working at financial institutions.
Global banks’ Mexican operations have been in regulators’ sights in recent years. HSBC in 2012 paid more than $1.9bn to US authorities for permitting the laundering of drug trafficking money.
Despite the closure of Banamex USA — and undeterred by compliance headaches and questions about the Trump administration’s policies toward the country — Citi is not loosening its ties with Mexico, which is its second-biggest market.
Last year the parent group unveiled plans to invest $1bn in its Mexican business, which it has renamed Citibanamex. It is adding 2,500 new ATMs and improving its mobile offering.
In a statement, Citibanamex said the Banamex USA operations would be closed by the end of June. Citi said it was “pleased to resolve these matters” and that it was fully reserved for the $97m forfeiture.
“Among our most serious obligations as a bank is to achieve the strongest possible system for anti-money laundering and sanctions compliance to protect the integrity of the financial system,” the bank said.
“We continually take steps to strengthen and enhance our BSA and AML programmes.”
The justice department added that the subsidiary had “engaged in extensive remedial actions” including “ultimately ceasing all banking operations” and had received “partial credit” for co-operating.
(Published by Financial Times - May 22, 2017)