Citigroup Inc.’s (C) unit Banamex (Banco Nacional de Mexico) USA is facing another regulatory probe over its money-laundering controls. The New York-based bank revealed in its latest annual filing that its compliance with Bank Secrecy Act (“BSA”) and anti-money laundering (“AML”) laws is being probed by additional authorities and its subsidiary Banamex USA was not being spared.
Citigroup mentioned that several regulators including Financial Crimes Enforcement Network – a bureau of the U.S. Department of Treasury – and the California Department of Business Oversight have asked the bank for information related to BSA and AML issues.
Notably, last year, the company disclosed that Banamex USA had received grand jury subpoenas from the United States Attorney’s Office for the District of Massachusetts and a subpoena from the Federal Deposit Insurance Corporation (“FDIC”) regarding the company’s policies, procedures and activities with respect to compliance with BSA and AML requirements.
The company stated that it is extending full co-operation to the investigators.
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 the Mexican bank, Banamex in 2001. However, the USA unit has been entangled in regulatory probes since the past few years.
Regulators had earlier identified that Citigroup had inadequacies over its AML compliance at Banamex USA. In 2012, FDIC and the California regulators filed a consent order asking Banamex USA to improve the processess of high-risk customer identification. In 2013, Citigroup entered into a consent order with the Federal Reserve to take steps to improve company-wide anti-money laundering compliance efforts.
Separately, in Wednesday’s filing, Citigroup also stated that it is fully cooperating with all the ongoing investigations relating to the fraud involving Banamex, Oceanografia S.A. de C.V., a Mexican oil services company, and Petróleos Mexicanos – a key supplier to the Mexican state-owned oil company.
Citigroup also mentioned in the filing that the estimated range for possible legal losses stands at $4 billion, down from $5 billion in Sep 2014.
Citigroup is shouldering legal issues which are weighing on its financials. Notably, following the detection of fraud in Banamex, Citigroup revised earnings for fourth-quarter 2013 and full-year 2013 in Feb 2014 while in October 2014, it restated the third-quarter 2014 results to account for additional legal charges worth $600 million. Most recently, legal charges significantly hurt fourth-quarter 2014 profits.
While nothing can be said about the outcome of the ongoing investigations, we believe that any probable settlement will weigh on the company’s expense base to some extent.
Currently, Citigroup carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the finance space include Customers Bancorp, Inc. (CUBI), Provident Financial Holdings, Inc. (PROV) and Anchor Bancorp (ANCB). All these sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment