CHAPTER 8

Corporate Money-Laundering Events in USA

Many money-laundering cases are occurring around the world. However, revealing illegal actions requires investigation and knowing the customer. The cases below are examples that expose the money laundering activities and the actions taken by some banks. These examples are important for the reader to understand the span of money laundering activities.

Banamex USA

Banamex is a bank located in California, USA, operated as a U.S. division of Banco Nacional de Mexico. The bank, offered U.S. dollar credits to Mexican customers, and transferred money (credits) to Mexico or anywhere the customer wanted based on the agreement with Western Union. It became the third largest bank in the country when Citigroup acquired the Mexican bank in 2001 and operated it as a Commerce Bank, California for 5 years after the acquisition. However, Citigroup called the unit Banamex in 2006 to associate it with the Mexican market.

Antonio Peña Arguelles (Citigroup’s Banamex, USA)

The article written by Alan Katz and Dakin Campbell, Bloomberg Markets in 2015 ‘Inside the Money Laundering scheme that Citibank Overlooked for Years’ explain the money laundering case of Citigroup’s Banamex, USA.

Antonio Peña Arguelles had a small business and wanted to open an account in Citigroup’s Banamex USA in 2005. His business was breeding cattle and white-tailed deer, farm-raised for their grand antlers. According to the know-your-customer documents the bank requires, he expected $50 deposits to his account every month.

A week later, he transferred $7.09 million to his account in Citigroup’s Banamex USA from an account in Mexico. The wired money happened to be drug money from Los Zetas, a cartel, formed by former Mexican soldiers. According to the banking regulators’ report in 2013, Peña Arguelles smuggled $59.4 million through his account over a period of 8 years.

Banamex USA failed to notice this. The regulators’ report also mentions Banamex USA’s lack of investigation as of lacking suspicion even after the murder of Antonio Peña Arguelles’s brother, Alfonso in 2011. Alfonso’s body was discarded at the Christopher Columbus memorial in Nuevo Loredo, Mexico. The deceased body had a sign above him accusing money laundering and stealing from the cartel.

In August 2012, the Federal Deposit Insurance Corporation (FDIC) and the California Department of Business Oversight delivered a written order to bank Banamex USA to check some of its old bank accounts. However, Banamex USA has not taken any action about the subject matter until May 2013. Consequently, in May 2013, the FDIC and California Department of Business submitted to a confidential report about Banamex USA criticizing the company for not investigating the issue and solving the matter when possible with $32 million of a budget to correct the problems for that year.

The Peña Arguelles case states that Banamex USA has avoided inspecting the money transfers between US and Mexico branches. As a result of the detection of money-laundering activity, the bank had to pay $925 million to US government and $700 million to customers (Inside the Money Laundering Scheme that Citi Overlooked for Years, Bloomberg markets, Nov 2015).

What happened at Citigroup after money laundering transaction is revealed?

    •  In 2015, employees increased by 15%, to 30,000 in regulatory and compliance functions.

    •  In May 2015, the company agreed to pay $925 million to the U.S government.

    •  In July 2015, Citigroup agreed on paying $700 million to customers for illegal activities associated with the supplementary credit card products.

Citigroup is investigated by Justice Department about money- laundering activities at Banamex USA. The Federal Reserve and the Office of the Comptroller of the Currency departments also checked Citigroup’s anti-money-laundering activities.

Sonia de Pau

In 2012, Sonia De Pau, a Mexican housewife, opened an account at the Texas branch of Banamex U.S. According to a 2013 FDIC report, she wanted to save money in USDs and spend it for her personal needs.

In November 2012 Sonia de Pau deposited a $25,000 check and she deposited 4 other checks worth $1.44 million 11 days after depositing the first one.

The International Bank of Commerce issued the checks.

What happened after?

Bank employees discovered the deposits before Sonia de Pau transferred the money out of her account. On Dec 3 2012, Banamex USA contacted its Mexican branch and warned it about the customer’s account activity. De Pau’s account was blocked by a legal order. However, Banamex USA did not take any further action until Dec 20, and found that most of the money was wired out of de Pau’s account. A 2013 FDIC Report stated that, on Dec 20, Banamex USA filed a suspicious activity report with the U.S. Treasury’s Financial Crimes Enforcement Network and the report had missing information about the withdrawn money on De Pau’s account. A FDIC report in 2013 also stated that, after the initial report, Banamex USA ignored to review the ongoing suspicious activity and prevented law enforcement from tracking the deposited funds.

FDIC sent a consent order to Banamex USA before issuing the formal agreement in August 2012. The order was sent to inform the bank about what needed to be fixed. However, according to the FDIC 2013 report, Banamex management failed to show interest in detecting or reporting suspicious money transfers until mid-2013.

In 2015, Citigroup’s Mexico unit received a subpoena by the Justice Department in addition to an investigation on Banamex USA about the fund transfers between the US and Mexico units of the bank.

As the investigation follows, employees were questioned and revealed the overlooked actions. The CEO of the bank has changed in 2013 right after the federal’s consent order. The new CEO, Rebecca Macieira-Kaufmann, brought new rules to the bank to avoid future money-laundering activities.

Banamex USA had $3 million in assets whereas Citigroup’s assets were $1.8 trillion.1 Banamex, as the largest global subsidiary of Citigroup, damaged Citigroup’s reputation with its $400 million fraud loans. Furthermore, Citigroup had more money laundering issues long before these cases.

According to the U.S. General Accounting Office report 1998, in the mid-1990’s, the bank transferred more than $100 million from the accounts of Raúl Salinas, the brother of Mexico’s former president, to accounts in Switzerland and United Kingdom. In addition to that, Banamex also concealed the source of this money. In 2001, after U.S. law enforcement officials revealed this money-laundering activity, the bank had to pay $7.7 million in penalties to the U.S. government.

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1See present (2016) balance sheet at: http://www.ibanknet.com/scripts/callreports/getbank.aspx?ibnid=usa_750864

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