Citigroup Receives Anti-Money Laundering Order From Fed

Citigroup Inc., the third-biggest U.S. lender, must show the Federal Reserve it has tightened safeguards to prevent a repeat of money-laundering violations.

Regulators told the New York-based company to explain procedures put in place to improve compliance with the Bank Secrecy Act and anti-money-laundering regulations, known as BSA/AML, the Fed said today in a consent order.

The bank failed to conduct proper due diligence on customers and was too slow to file so-called suspicious activity reports, the Office of the Comptroller of the Currency said in April. The deficiencies prevented Citigroup from identifying risky customers and monitoring client relationships, the regulator said.

“Citigroup lacked effective systems of governance and internal controls to adequately oversee the activities” of two of its subsidiaries with respect to money laundering, according to the Fed’s order.

The Fed said it acted after regulators including the OCC and the Federal Deposit Insurance Corp. filed orders last year against bank subsidiaries Citibank NA and Banamex USA because of deficiencies they found.

The Bank Secrecy Act requires banks to report all large cash deposits to help prevent crimes such as drug trafficking and terrorist financing.

Japan Case

The possible flow of illicit funds through Citigroup, which has operations in more than 100 countries, has attracted scrutiny in the past. Japanese regulators censured the bank in 2004 and 2009 for violating anti-money-laundering rules while U.S. congressional investigators found the bank allowed the practice to take place in the 1990s.

Congressional investigators criticized Citigroup in 1998 for not questioning large money transfers by Raul Salinas de Gortari, brother of former Mexican President Carlos Salinas de Gortari and by the sons of former Nigerian military leader General Sani Abacha.

“Citi has made substantial progress in strengthening its BSA/AML compliance program and addressing legacy AML risks in a comprehensive manner across products, business lines, and geographies,” Molly Millerwise Meiners, a spokeswoman for the bank, said in a statement. “Citi continues to take the appropriate steps to address remaining requirements and build a strong and sustainable program.”

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