US Federal Reserve Orders Citigroup To Clamp Down On Money Laundering


The US Federal Reserve has warned Citigroup to fix "deficiencies" in its anti-money laundering controls, reported the Wall Street Journal, giving the financial institution two months to submit a written compliance procedural plan addressing steps such as policies and funding for personnel.

The order was based on similar mandates issued against Citi and its subsidiaries last year, when concerns were raised over Citi’s Mexican affiliate Banamex, in particular, over possible money laundering activities.

Although neither Citi nor Banamex have admitted any wrongdoing – and no fines were issued on Tuesday – the Federal Reserve still faulted the financial institution for lacking “effective systems of governance and internal controls to adequately oversee the activity.”

Furthermore, the Office of the Comptroller of the Currency (OCC) last April also accused the group for violating the Bank Secrecy Act, a federal law that requires banks to report all large cash deposits to help prevent crimes such as drug trafficking and terrorist financing.

"As evidenced by the deficiencies ... that led to the issuance of the OCC and FDIC (Federal Deposit Insurance Corporation) consent orders ... Citigroup lacked effective systems of governance and internal controls to adequately oversee the activities of the Banks," the Fed said in its order, according to Reuters.

On its part, the New York-based bank said in a statement that it was already making "substantial progress" in strengthening its anti-laundering programs "in a comprehensive manner across products, business lines and geographies."

"Citi continues to take the appropriate steps to address remaining requirements and build a strong and sustainable program," the statement read.

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Separately, WSJ also reported on Tuesday that large banks worldwide may incur legal costs of up to $100 billion for actions tied to the 2008 Financial Crisis.

Citigroup this month for instance agreed to pay $730 million to settle claims that it misled bondholders of its exposure to subprime mortgages and other high-risk securities during the financial crisis. Though the financial institution remains adamant against any wrongdoing, it said agreed to the settlement in order to “eliminate uncertainties”.

The Federal Reserve on Tuesday also not give any specific examples for money laundering cases at Citigroup.

However, a landmark case last December saw HSBC Bank pay out a record $1.9 billion to settle accusations that it transferred billions of dollars for nations like Iran and enabled Mexican drug cartels to move money illegally through its American subsidiaries. HSBC’s Mexican unit was also fined $27.5 million by regulators for its failure in money laundering control.

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