Citigroup (NYSE:C) may soon shut down the US branch of its Mexican subsidiary Banamex, which authorities are targeting for suspected money laundering, accusing the company of having inadequate internal control procedures.
According to a report by the Wall Street Journal, US authorities have accused Banamex USA, based in Century City, California, of being lax in its internal controls related to transfers and money laundering.
In talks with regulators from the Federal Deposit Insurance Corporation (FDIC), the federal agency in charge of guaranteeing bank deposits, Citigroup hinted that it might shut down Banamex, the WSJ said, citing sources close to the case.
US authorities have asked Banamex to pay a US$100 million fine to close the case, the newspaper said.
Citigroup has insisted that it has cooperated with all investigations related to Banamex USA, both as far as banking secrecy and money laundering are concerned, stressing that it will enforce controls in accordance with present rules.
Banamex USA holds assets billion and employs about 300 people with the bulk of operations concentrated in southern US cities such as Houston or San Antonio. Its customers typically have interests in Mexico and the United States.
The Department of Justice suspects Banamex USA of having omitted fraudulent activity in connection to bank accounts likely belonging to members of drug cartels, suggests the WSJ.
Banamex USA is part of Banamex, Citigroup's Mexican subsidiary, acquired in 2001. Since 2014, it has faced two major cases of fraud, which led to the parent regaining control of its subsidiary last April.
In the most significant one, Banamex unit was thought to have lent money to companies relate to state oil company Pemex; however, the Mexican government said it did not hire these companies.
The fraud cost Citigroup about US$235 million, prompting investigations by regulators.