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Citigroup Banamex USA unit fined $140 million, will close this year

The Federal Deposit Insurance Corporation Wednesday imposed a civil penalty of $140 million against Banamex USA of Century City, California for violations of the Bank Secrecy Act (BSA) and anti-money laundering (AML) laws and regulations.

In a concurrent action, the California Department of Business Oversight (CDBO) assessed a $40 million penalty against Banamex USA (BUSA). The California fine will be paid out of the FDIC assessment.

BUSA is an indirect wholly-owned subsidiary of Citigroup and an affiliate of Banco Nacional de Mexico (Banamex).

Citi acquired BUSA when it bought Banamex in August 2001.

BUSA, then named California Commerce Bank, was a subsidiary of Banamex.

It has three offices — two in Texas and one in California.

Citigroup said in a statement Wednesday it “has decided to wind down banking operations at BUSA, subject to a satisfactory liquidation plan.”

“This will be an ongoing and orderly process as BUSA exits retail and commercial business lines,” the statement said.

Banamex USA has assets of about $500 million and deposits of about $460 million. It has branches in California and Texas and about 300 full-time employees.

Citibank said “BUSA has not been able to operate to the scale necessary to generate consistent quality earnings.”

The FDIC said it “determined that the bank failed to implement an effective BSA (Bank Secrecy Act) and AML Compliance Program over an extended period of time.”

BUSA failed to retain a qualified and knowledgeable BSA officer and sufficient staff, the FDIC said. It also failed to maintain “adequate internal controls reasonably designed to detect and report illicit financial transactions and other suspicious activities.”

The FDIC said BUSA didn’t provide sufficient BSA training or conduct effective independent testing.

BUSA will close its offices in Houston and San Antonio in October. Its Los Angeles office will remain open during the winding down.

The joint order against Banamex USA from the FDIC (and on behalf of the California Department of Business Oversight) is here (pdf).

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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