For a number of years now, employees of Citigroup have been skeptical that the millions of dollars the bank was routing to Mexico were suspicious, however, the bank failed to forewarn regulators or look more closely at their monitoring system for money laundering issues.
Citigroup inherited Banamex USA (BUSA) in 2001 in the hopes of building its access to Mexico’s market to the millions of Mexican immigrants in the United States who needed to send money to their families at home.
BUSA, based out of Los Angeles, California, was beginning to take over transactions from the United States to Mexico but failed to properly secure its systems against drug money and other illegal assets.
In the past, BUSA was alerted to thousands of red flags and internal alerts but never filed any suspicious activity reports. The bank attributes the cause for their lack of action to being understaffed and having to manually handle and review all suspicious transactions with just 2 employees on staff.
In 2006, BUSA first started to recognize the issues in its remittance processing business, but unfortunately failed to improve the transaction monitoring system making it a higher risk for money laundering.
In order to end the investigation, Citigroup settled on paying $97.4 million and the Justice department agreed to not press criminal charges against Citigroup in relation to BUSA’s neglect. Furthermore, BUSA admitted to not using an effective and valid anti-money laundering compliance system which resulted in the violations.
This case represents a monumental moment for the bank because, for the first time in history, an agreement was made between the Justice Department and a major bank. This resolution also allows Citigroup to hone in on the regulatory issues and risks connected to the bank’s business in Mexico.
Recently in March 2017, the FDIC also published similar enforcement actions against four former senior BUSA executives in relation to the Bank Secrecy Act (BSA) violations. Two of the former executives were charged and banned from future work in the financial industry.
Moreover, BUSA was also penalized in July of 2015 by the Federal Deposit Insurance Corporation (FDIC) and California Department of Business Oversight which ordered BUSA to pay a $140 million civil money sanction to settle the BSA regulatory probes.
Citigroup believes that by June 30, 2017, Banamex USA will be shutting down operations and closed officially.
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