Yahoo Finance Citi Probed Over Dealings Linked to Mexican Billionaire
Adding to its legal woes, Citigroup Inc. C has come under the scrutiny of U.S. Justice Department (DOJ) regarding the bank’s dealing with companies related to Mexican billionaire Carlos Hank Rhon. The news, first reported by Bloomberg, stated that the DOJ’s probe comes as part of an expanding investigation into the bank’s money-laundering controls.
Citing documents, the news agency stated that Citigroup has been asked to provide information regarding accounts associated to four businesses affiliated with Hank Rhon. The DOJ is investigating the anti-money laundering practices at Citigroup’s Mexico-based subsidiary – Banamex (Banco Nacional de Mexico) – and probing whether any of its clients were involved in money laundering.
Hank Rhon, is the son of Mexican politician and influential businessman Carlos Hank Gonzalez. Neither Hank Rhon nor his companies have been accused of any misconduct.
In January, Citigroup received a subpoena from the DOJ and Mexican regulators. The authorities are seeking several information including signature cards, paperwork tied with account opening, “know-your-customer” risk assessments, account ledger cards and correspondence messages and memos related to the accounts.
Separately, the DOJ is seeking similar paperwork from Citigroup for a fifth firm, Banco Monex, which is not related to Hank Rhon. Also, the bank has been asked to provide less-detailed information on over a dozen other companies.
Citigroup has been under pressure to improve its overall compliance procedures after a security unit in Mexico committed fraud. Further, Banamex disappointed Citigroup last year with the disclosure of fraud worth $400 million in the unit. The unit accounts for around 10% of Citigroup’s revenue. Notably, the bank intends to deploy 30,000 people in regulatory and compliance platform by the end of 2015, reflecting an increase of 15% year over year.
Last month, Citigroup decided to shut the Banamex USA subsidiary. The closure followed on the agreement by the bank to pay $140 million as settlement to regulators over loopholes in its anti-money laundering program. Based in California, Banamex USA is engaged in providing banking services to individuals and small businesses in the U.S. and Mexico. Citigroup took over Banamex USA with the acquisition of Banamex in 2001.
Citigroup currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the finance space include Bank of America Corp. BAC, The Bank of New York Mellon Corp. BK and Northern Trust Corp. NTRS. All three stocks carry a Zacks Rank #2 (Buy).
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