Citigroup Inc. (NYSE/C) is expected to close its Banamex USA operation after government authorities began probes of possible violations of anti-money laundering laws, according to The Wall Street Journal. (Source: The Wall Street Journal, May 31, 2015.)
Incorporated on March 8, 1988, Citigroup Inc. is a financial services holding company. The company is engaged in providing financial products and services; including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management to consumers, corporations, governments and institutions. (Source: Reuters, last accessed June 1, 2015.)
Banamex USA is based in Century City, California. It has branches in Houston and San Antonio, Texas. It mainly provides services to customers who need to transfer money abroad, such as U.S. citizens who live in Mexico. In 2001, Citigroup bought Banamex USA, the second-largest bank in Mexico.
While authorities suspected that Banamex USA had been involved in money laundering activities, Citigroup brought up the idea to settle probes related to Banamex USA’s alleged activities.
However, regulators are not demanding that Citigroup close Banamex USA. But they are requiring Banamex USA to pay more than $100 million to settle in regards to the allegations.
A Justice Department investigation is reviewing whether Banamex USA failed to notify the government about suspicious banking activities that, in some cases, involved suspected drug-cartel members.
In 2012, Banamex USA opened new branches in Texas cities, including El Paso and Brownsville. Soon after, problems surfaced after the FDIC and the California regulators found weaknesses in the systems intended to prevent money laundering.
The major area of concern was a service that let people move money across the border without being a Banamex USA client. Therefore, authorities issued an order asking Banamex USA’s employees to closely monitor activities for customers who might be using the bank to transfer dirty money.
Citigroup hired consultants, expelled Banamex USA’s CEO as well as a top manager, closed some branches, and stopped doing remittances. But Banamex USA failed to address the concerns.
The Wall Street Journal reported that Citigroup decided to shrink Banamex USA. Its roughly $1.0 billion in assets is down from the $1.4 billion in early 2012. It now has three branches, down from 11 in 2012.