Citigroup Settles With Justice Department Over Money Laundering -- Update
May 22 2017 - 12:11PM
Dow Jones News
By Emily Glazer and Telis Demos
Citigroup Inc. has agreed to pay less than $100 million to
settle a yearslong money laundering investigation, the bank and
government agencies announced Monday.
The bank reached a settlement with the Justice Department and
U.S. attorney's office in Boston for $97.44 million, with no
sanctions against Citigroup and a so-called nonprosecution
agreement, according to the bank and Justice Department. The
investigation centered on activity in the bank's Banamex USA
unit.
As part of the agreement, Citigroup admitted that Banamex USA
violated the Bank Secrecy Act from at least 2007 until at least
2012.
The agreement is far less than previous money laundering
settlements with large banks and is one of the first to emerge
since the change in presidential administrations. Other deals with
big banks have often topped $1 billion and involved so-called
deferred prosecution agreements or criminal guilty pleas.
In 2012, HSBC settled for about $1.9 billion; in 2014 J.P.
Morgan Chase & Co. settled for about $2 billion and BNP Paribas
settled for nearly $9 billion; and in 2015 Commerzbank settled for
about $1.5 billion.
Citigroup's settlement is just the second nonprosecution
agreement, known as an NPA, for a big bank in the last eight years.
The other arose from J.P. Morgan's settlement last year over hiring
sons and daughters of Asian government officials, known as
princelings.
Citigroup said in a statement that it was "pleased to resolve
these matters." The bank said it would be finished with winding
down Banamex USA by June 30. "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 added.
While Citigroup's settlement was far smaller than those of its
peers, it isn't clear to investors if this will result in a gain
that could be reflected in upcoming earnings. While banks often say
in quarterly releases if they increased or decreased their
litigations reserves, the absolute level of those reserves isn't
disclosed.
Citigroup had litigation expenses of $1.1 billion in 2016,
according to bank regulatory filings.
Banamex USA was a California-based bank owned by Citigroup that
operated a handful of branches along the U.S.-Mexican border.
Citigroup announced in 2015 that it would shut down Banamex USA and
began closing branches. That same year the Federal Deposit
Insurance Corp. and California Department of Business Oversight
fined Banamex USA $140 million for lax monitoring of potentially
illicit transactions being conducted through cross-border
remittances.
The unit was previously part of the much larger Mexico-based
Banamex group that Citigroup acquired in 2001. This is now known as
Citibanamex.
From 2007 to 2012, Banamex USA processed over 30 million
remittance transactions to Mexico with a total value of more than
$8.8 billion, but there was virtually no investigation for
suspicious activity, according to a statement of facts related to
the settlement. Over that time period, the banking unit filed just
nine suspicious activity reports, even though its own monitoring
reports identified over 18,000 alerts on more than $142 million in
potentially suspicious transactions, the statement said.
In March 2017, the FDIC announced regulatory resolutions with
four former Banamex USA executives related to Bank Secrecy Act
violations. Those prohibited some individuals from participation in
the conduct of a financial institution and included monetary
penalties ranging from $30,000 to $90,000.
Citigroup's last major settlement with the Justice Department
was for $925 million in 2015, alongside several other banks,
related to alleged manipulation of the foreign exchange market. In
2014 Citigroup paid $7 billion to the Justice Department and other
agencies to settle allegations that it knowingly sold shoddy
mortgages to investors.
Write to Emily Glazer at emily.glazer@wsj.com and Telis Demos at
telis.demos@wsj.com
(END) Dow Jones Newswires
May 22, 2017 11:56 ET (15:56 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Citigroup (NYSE:C)
Historical Stock Chart
From Aug 2024 to Sep 2024
Citigroup (NYSE:C)
Historical Stock Chart
From Sep 2023 to Sep 2024