2017-05-22 16:51:02
Citigroup Agrees to $97.4 Million Settlement in Money Laundering Inquiry

For years, Citigroup employees suspected that millions of dollars that the bank was moving to Mexico might be suspicious. Yet the bank, federal prosecutors said on Monday, failed to sufficiently alert regulators or step up its monitoring for money laundering.

Even as the Citigroup unit Banamex USA was growing to dominate the business of remittances from the United States to Mexico, the bank did not properly safeguard its systems from being infiltrated with drug money and other illicit funds, prosecutors said.

On Monday, Citigroup agreed to settle a long-running federal investigation into Banamex USA and pay $97.4 million. In exchange, the Justice Department will not charge the bank criminally for the misdeeds of Banamex USA, based in California.

As part of the agreement, Banamex USA “admitted to criminal violations by willfully failing to maintain an effective anti-money laundering” compliance program, according to the Justice Department.

From 2007 to 2012, the banking unit generated about 18,000 alerts of suspicious transactions among the 30 million Mexico remittances it processed, prosecutors said.

Yet the bank conducted fewer than 10 investigations.

The deal represents the first such agreement between a major bank and the Justice Department under Attorney General Jeff Sessions.

The settlement brings to a close some of Citigroup’s most serious regulatory issues related to its profitable, but risky, business in Mexico.

Citigroup inherited Banamex USA in 2001, when the bank acquired Banamex, one of Mexico’s largest banks.

Banamex has helped fuel Citigroup’s profit as the bank rode the wave of Mexico’s growing economy and financial modernization. Banamex USA was supposed to build on Citigroup’s access to Mexico’s market by connecting the millions of Mexican immigrants living in the United States who needed to send money to their families at home.

But Banamex has also been a source of scandals, which eventually toppled one of its most senior executives, the bank’s former co-president, Manuel Medina-Mora, who oversaw the bank’s Mexico operations and retired in 2015.

Banamex was defrauded of about $400 million by an oil services company with a history of questionable dealings. It was also revealed that rogue bodyguards working to protect bank executives in Mexico were separately accused of taking kickbacks.

The settlement may be examined for clues to how the Trump administration will respond to misdeeds by big banks.

After years of paying billions of dollars to settle anti-money-laundering and mortgage-related cases brought by the prosecutors working for the Obama administration, white-collar defense lawyers and investors have been watching to see whether the new administration will ease up on the banks.

But it is difficult to draw too many definitive conclusions about Monday’s agreement.

The $97.4 million settlement is only a fraction of the $1.9 billion that the London-based HSBC paid in 2012 to settle a money laundering case.

But that case also involved accusations that the bank transferred billions of dollars for Iran, violating United States sanctions.

Citi’s Banamex USA unit was not accused of violating sanctions.

Citigroup was able to settle the Mexico case without pleading guilty — a step that the Justice Department under President Barack Obama had increasingly begun to require of banks that were looking to settle cases.

Citigroup was granted a nonprosecution agreement as part of its deal on Monday. Such agreements became rare under Mr. Obama, who faced criticism that the federal government had not done enough to punish big banks in the wake of the 2008 financial crisis.

But in November, JPMorgan Chase was granted a nonprosecution agreement when it settled a bribery investigation into its hiring of children of Chinese leaders to win business in that country.

Before the $97.4 million settlement on Monday with federal prosecutors, Citigroup had already paid a $140 million fine to the Federal Deposit Insurance Corporation over the oversight lapses at Banamex USA. Three former executives at the banking unit have paid fines and have been effectively barred from the banking industry.