Live market coverage co-anchored from Hong Kong and New York. The following key principles govern Citi's approach to controlling Anti-Money Laundering (AML) risk: Compliance with AML laws and regulations; Cooperation with and support of regulators and law enforcement agencies in their efforts to prevent, detect and control financial crime; But Banamex has also been a source of scandals. Financial services firms, regulators and law enforcement agencies alike work very hard to stay ahead of increasingly sophisticated criminals that seek to exploit the global financial system. Antonio Maria Costa, who was executive director of the UN's office on drugs and crime from May 2002 to August 2010, charts the history of the contamination of the global banking industry by drug and criminal money since his first initiatives to try to curb it from the European commission during the 1990s. We also train our staff to assure that they are well versed in the evolving techniques that criminals use to infiltrate the system and are well-equipped to combat money laundering and other financial crimes. The Guardian reports that on March 24, 2010 just one week after the bank agreed to the settlement, Wells Fargo stock rose by 1 percent. This process is the first step in traditional money laundering schemes, known as placement. State Farms Exit Makes It Harder. I have come to believe most of the cash remains dirty and is reinvested into the illegal market. In short, most cartel proceeds are used to corrupt officials and purchase weapons and drugs; the smaller percentage is laundered through legitimate business and institutions. James started out as a cotton broker after the Civil War, shifted into railroad investment, and then partnered with Rockefeller and Standard Oil as a Robber Baron promoting monopoly power in the United States. We've compiled a list of cases that at times blur the line between organized crime, governments, financial and law enforcement institutions. What they found was as Costa says the tip of the iceberg of what was happening to drug money in the banking industry, but at least it was visible and it had a name: Wachovia. Martin Woods, a Liverpudlian in his mid-40s, joined the London office of Wachovia Bank in February 2005 as a senior anti-money laundering officer. "These are the proceeds of murder and misery in Mexico, and of drugs sold around the world," he says. As it turned out, however, Woods was on the right track. When certain horses became profitable they would be transferred to Trevio or other businesses under his name. Late in 2007, Woods attended a function at Scotland Yard where colleagues from the US were being entertained. HSBC would put tremendous pressure and offered promotions and salary incentives for AML officers to close as many alerts as quickly as possible. In short, the goal was to close the Alerts and green-light the underlying transactions and avoid elevating the Alert to a Suspicious Activity Report.. They had sequential numbers and deposited larger amounts of money than any innocent travelling person would need, with inadequate or no KYC information on them and what seemed to a trained eye to be dubious signatures. World War I Suggests the Price May Be Tragic if it Doesn't, The Vietnam War Crimes You Never Heard Of. "In consideration of Wachovia's remedial actions," concludes the prosecutor, "the United States shall recommend to the court that prosecution of Wachovia on the information filed be deferred for a period of 12 months.". 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Alan Singer is a historian and chair of the Hofstra University Department of Teaching, Learning and Technology. On 16June Woods was told by Wachovia's head of compliance that his latest SAR need not have been filed, that he had no legal requirement to investigate an overseas case and no right of access to documents held overseas from Britain, even if they were held by Wachovia. The office of the comptroller of the currency is still examining whether individuals in Wachovia are criminally liable. In one instance unrelated to drug money laundering, a unit of Citigroup had to plead guilty to a felony count of price manipulation of dollars and eurosbut no official was sent to prison. ANZ faces three charges of being knowingly concerned in and aiding and abetting contraventions of these laws. Of course in 2017 it was still the number one banker forcoal powerin the United States. By Emily Flitter Published Oct. 7, 2020 Updated Feb. 10, 2021 Two months after one of its bankers accidentally sent nearly $1 billion to the wrong people, Citigroup agreed to pay $400 million to. We're talking about hundreds of millions of dollars. Even as the Citigroup unit Banamex USA was growing to dominate remittances from the United States to Mexico, the bank did not properly safeguard its systems from being infiltrated by drug money and other illicit funds, prosecutors said. "They didn't answer the obvious questions: 'Is the transaction real, or does it look synthetic? But Banamex has also been a source of scandals, which eventually toppled one of its top executives, the co-president Manuel Medina-Mora, who oversaw its Mexico operations and retired in 2015. These compliance officers would clear red flags to close any inquiry into the underlying transaction, according to Stern. To his amazement, the response from Wachovia's Miami office, the centre for Latin American business, was anything but supportive he felt it was quite thereverse. The bank helped Raul Salinas, the brother of Mexicos President at the time, move as much as $100 million into Swiss and U.K. accounts in the mid-1990s. Other cases of money laundering by Citibank were cited in Argentina and Japan. During research into the Wachovia Mexican case, the Observer obtained documents previously provided to financial regulators. Chapter 1 describes a local bank with national ambitions between 1812 and 1890. "For the time period of 1 May 2004 through 31 May 2007, Wachovia processed at least $$373.6bn in CDCs, $4.7bn in bulk cash" a total of more than $378.3bn, a sum that dwarfs the budgets debated by US state and UK local authorities to provide services to citizens. In 2011 the New York Times reported DEA agents who had infiltrated Mexicos cartels handled shipments of hundreds of thousands of dollars in illegal cash across borders., Drug trafficking profits are impossible to manage, Michael Vigil, former DEA Chief of International Operations, tells Fusion. Third Line of Defense (Internal Audit) - Citi's Internal Audit function independently reviews activities of the first two lines of defense based on a risk-based audit plan and methodology approved by the Citigroup Board of Directors. Extended sections describe Taylors role in transforming the bank into a national financial institutions with international connections. He issued a number of SARs in 2006, of which 50 related to the casas de cambio in Mexico. All quotes delayed a minimum of 15 minutes. Now On to the Debt Crisis. But a special investigation by the Observer reveals how the increasingly frantic warnings of one London whistleblower were ignored, Original reporting and incisive analysis, direct from the Guardian every morning, 2023 Guardian News & Media Limited or its affiliated companies. Eventually Citibank dominated U.S. trade with Latin America and banking systems there, including Haiti where Citibank lobbied for a 1915 invasion by U.S. marines that led to a twenty-year occupation (see Peter HudsonsBankers and Empire). Is it in the interest of the Mexican people? A presidential sibling and Citibank. A FinCEN source says that $20bn already examined appears to have "suspicious origins". Citigroup has been reprimanded repeatedly during the past two decades for. Citi Wolfsberg Financial Crimes Compliance Questionnaire. WASHINGTON (Reuters) - A U.S. bank regulator has fined Citibank C.N $70 million for failing to address shortcomings in its anti-money laundering policies. He says these debt collectors, posing as anti-laundering officers, would add dashes to the wire filters so they wouldnt match and therefore the money would go through unnoticed. In July 2007, all of Wachovia's remaining 10 Mexican casa de cambio clients operating through London suddenly stopped doing so. By August 2006, Woods had identified a number of suspicious transactions relating to casas de cambio customers in Mexico. That is how the priorities work: secrecy first, public interest second. But the settlement leaves a sour taste in many mouths and certainly in Woods's. HSBC will have to pay $1.92 billion in fines and penalties to U.S. authorities for laundering Sinaloa cartel money and engaging in several banking law violations. "I think that a lot of things matter more than money and that marks you out in a culture which appears to prevail in many of the banks in the world," he says. Prosecutors could not conclude if Wells Fargos anti-money laundering policies were also deficient. Wachovia's business in Mexico was coming under closer and closer scrutiny by US federal law enforcement. On Monday, Citigroup agreed to pay $97.4 million in a settlement after a long federal investigation into Banamex USA. You get a quicker result that way they want to get the traffickers and seize their assets. "Through CDCs," said the court document, "persons in Mexico can use hard currency and wire transfer the value of that currency to US bank accounts to purchase items in the United States or other countries. They should have been on my side, because they were compliance people, not commercial people. The Sinaloa cartel was laundering millions through the Mexican branch. Banamex helped fuel Citigroups profit as the bank rode the wave of Mexicos growing economy and financial modernization. Once placed, the cash would be converted to dollars before being wired to the institutions U.S. and European branchesthe second step, designed to obscure ownership and origin of the money, known as layering. ", What concerns Mazur is that what law enforcement agencies and politicians hope to achieve against the cartels is limited, and falls short of the obvious attack the US could make in its war on drugs: go after the money. The document gives a fascinating insight into how the laundering of drug money works. "But I know there were external circumstances that worked to Wachovia's benefit, not least that the US banking system was on the edge of collapse. "After the Wachovia case, no one in the regulatory community has sat down with me and asked, 'What happened?' His business partner and later his son James were Citibank directors, and James eventually became bank president. Third-party banks and vendors conducting KYC due diligence, including the Wolfsberg Group Correspondent Banking Due Diligence Questionnaire (CBDDQ), should first use this platform to collect information and documents. Citigroup was granted a nonprosecution agreement as part of its settlement. Citibank bought Banamex, Mexico's third largest bank, in 2001 and soon opened Banamex USA branches all along the Texas-Mexico border. About $50 a month would come into the account, according to the documents. One of them, according to the document provided to Fusion by Mr. Stern: severely understaffing its AML compliance function and failing to implement an anti-money laundering program capable of monitoring suspicious transactions and activities from HSBC Group Affiliates, particularly HSBC Mexico from 2006 to 2010. The figure below simplifies how Raul used his wife, Paulina, to carry out the job, according to the Department of Justice. The Department of Justice was unable to verify whether bank officials had conspired. The Bloomberg article cited several other, equally egregious cases where Citibank, through Banamex USA, laundered drug money, failed to comply with compliance or due dilligence laws, and only received slap-on-the-wrist cash fines. The DEA is focused on drug trafficking rather than money laundering. The nature of the CDC business allows money launderers the opportunity to move drug dollars that are in Mexico into CDCs and ultimately into the US banking system. As part of a legal settlement,Banamex USAadmitted to criminal violations by willfully failing to maintain an effective anti-money-laundering compliance program and Citigroup agreed to pay $97.4 million in fines. Big banks, including Citigroup, have continued to stumble over compliance with U.S. anti-money-laundering laws. It's simple: if you don't see the correlation between the money laundering by banks and the 30,000 people killed in Mexico, you're missing the point.". Citigroup inherited Banamex USA in 2001 when the bank acquired Banamex, one of Mexicos largest banks. An Irish CEO is under investigation by Interpol and Britain's National Crime Agency (NCA) for allegedly facilitating money laundering for the Kinahan cartel, the Irish Daily Mail has learned. Bitcoin Faces Fresh Challenges After Debt Deal Moves Forward, Citigroup Warns, FTX Objects to Extension of Mediation Talks for Bankrupt Crypto Lender Genesis, Key House Republicans Unveil Crypto Market Structure Draft Bill. He says drug money has to be laundered eventually through legitimate financial institutions; in fact it has been laundered through entire cities. Wachovia was put under immediate investigation for failing to maintain an effective anti-money laundering programme. So at what point does someone at the highest level not get the feeling that something is very, very wrong?". The regulator assessed the civil penalty because the bank had failed to address concerns it had first flagged in 2012. The recent L.A. fashion district bust, where federal agents seized approximately $100 million in cartel cash, has put money laundering back in the global spotlight. There were "structured wire transfers" whereby "it was commonplace in the CDC accounts for round-number wire transfers to be made on the same day or in close succession, by the same wire senders, for the same account". A spokesman for the bank, a unit of Citigroup Inc C.N, said it aimed to satisfy all federal rules that target money laundering. The bank failed to file any suspicious activity reportseven after Pena Arguelles' brother was assassinated by the Zetas and accused of stealing some of the laundered cash in 2011, and even after Pena Arguelles was indicted by U.S. authorities for drug money laundering. He then undertook what banks call a "look back" at previous transactions and saw fit to submit a series of SARs, or suspicious activity reports, to the authorities in the UK and his superiors in Charlotte, urging the blocking of named parties and large series of sequentially numbered traveller's cheques from Mexico. Our Standards: The Thomson Reuters Trust Principles. Without the efforts of individuals like you, actions such as the one taken against Wachovia would not be possible.". On the other, you have massive suffering, misery and death. Three former executives at the banking unit have paid tens of thousands of dollars in fines and have been effectively barred from the banking industry. The settlement announced Monday may be examined for clues about how the Trump administration will respond to misdeeds by big banks. As a detective he joined the money-laundering investigation team of the National Crime Squad, where he worked on the British end of the Bank of New York money-laundering scandal in the late 1990s. Woods discussed the matter with Wachovia's global head of anti-money laundering for correspondent banking, who believed the cheques could signify tax evasion. The suspicion was corroborated years later, when the U.S. investigation "Operation Casablanca" revealed that [money from] the Jurez cartel entered Argentina through two Citibank accounts and others in shell banks [in the Cayman Islands and the Bahamas]. All rights reserved. in a money laundering schemes with Mexican drug cartels and was investigated by . I passed up purchasing a copy on Amazon for $849, but my university library was able to secure a copy through an inter-library loan. Primarily, these involved deposits of traveller's cheques in euros. The law enforcement people do what they are supposed to do, but what's the point? He was off work for three weeks, returning in August 2007 to find a letter from the bank's compliance managing director, which was unrelenting in its tone and words of warning. Over the years, the First National City Bank changed its name a number of times, but not its seedy business practices. All told, Pena Arguelles laundered $59.4 million through the account. Salinas was able to transfer $90 million to $100 million between 1992 and 1994 by using a private banking relationship formed by Citibank New York [and] the funds where [sic] transferred through Citibank Mexico and Citibank New York to private investment accounts in Citibank London and Citibank Switzerland. According to the U.S. investigation, the bank argued it had only violated one clause of its customer policy not performing a background check. On Monday, Citigroup said it expected the troubled unit would cease operations by June 30. Who are your clients? Next to step up in leadership was Frank Vanderslip, who helped finance the U.S. war with Spain and the annexation of the Philippines, and then pushed the bank to invest in the archipelago. De Pau was laundering money for both the Zetas and the Gulf Cartel, and had actually been arrested a year before she opened the Texas account for money laundering in Mexico. AML Advisory and Coverage AML Compliance Officers (AMLCOs), support their respective Business by providing regulatory compliance expertise and guidance in an advisory capacity to Business Management. In July 2013, a federal judge in Mexico exonerated Raul Salinas from illicit enrichment. As early as July 2005, Wachovia was aware that other large US banks were exiting the CDC business based on [anti-money laundering] concerns despite these warnings, Wachovia remained inbusiness.". In 2005 the World Bank said that Mexico was receiving $8.1bn in remittances. They don't want to listen to me, he said. Woods had a police officer's eye and a police officer's instincts not those of a banker. "All the law enforcement people wanted to see this come to trial. Also, "many of the CDCs that used Wachovia's bulk cash service sent significantly more cash to Wachovia than what Wachovia had expected. Citigroup's Los Angeles-based subsidiary Banamex USA has agreed to forfeit $97 million to avoid criminal charges for having willfully failed to maintain an effective anti-money laundering program for at least six years, federal prosecutors disclosed Monday. But this is like treating a sick plant by cutting off a few branches it just grows new ones. More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn a sum equivalent to one-third of Mexico's gross national product into dollar accounts from so-called casas de cambio (CDCs) in Mexico, currency exchange houses with which the bank did business. The week that the deferred prosecution expired, a spokeswoman for Wells Fargo said the parent bank had no comment to make on the documentation pertaining to Woods's case, or his allegations. Now that the year's "deferred prosecution" has expired, the bank is in effect in the clear. Banamex was defrauded of about $400 million by an oil services company with a history of questionable dealings. Jessica Silver-Greenberg contributed reporting. One of the biggest problems was staffing. CNNMoney (Hong Kong) First published June 1, 2018: 6:57 AM ET . ", Many of the sequentially numbered traveller's cheques, of the kind dealt with by Woods, contained "unusual markings" or "lacked any legible signature". Does the traveller's cheque meet the protocols? This is the biggest money-laundering scandal of our time. The investigation has further revealed that the identities of the individuals who sent the money were false and that the business was a shell entity. Markets never sleep, and neither does Bloomberg. Hardly surprising, then, that Wachovia does not appear to be the end of the line. or 'What can we do to avoid this happening to other banks?' On February 2003, a gunman murdered Calderoni at his residence in McAllen, Texas. Mexico is the US's third largest international trading partner and Wachovia was understandably interested in this volume of legitimate trade. Cartels were paying people at HSBC, they were walking into HSBC with cases full of cash and then the money would be withdrawn from U.S. accounts. He says the bank was actively enrolled in the act. I recently saw a copy on the customer desk at my local branch in Brooklyn and could not resist reading and reviewing the book. You follow the money and it leads to other organized crime members. Vigil claims that during his watch they never lost track of a transaction. One of the foremost figures in the training of anti-money laundering officers is Robert Mazur, lead infiltrator for US law enforcement of the Colombian Medelln cartel during the epic prosecution and collapse of the BCCI banking business in 1991 (his story was made famous by his memoir, The Infiltrator, which became a movie). Yet the total fine was less than 2% of the bank's $12.3bn profit for 2009. The $97.4 million settlement is only a small fraction of the $1.9 billion HSBC paid in 2012 to settle a money laundering case. At the time, he was 25-years-old, a fresh MBA grad. Consistent with this goal, Citi is committed to the fight against money laundering and leading the way in Responsible Finance conduct that is transparent, prudent and dependable. Traffic Group, a conspirator in the bribery charges, made wire payments totaling $11 million from a Citibank account in Miami. We acknowledge that we must constantly work to identify and understand the potential risks of money laundering and terrorist financing, and implement appropriate processes to mitigate, and ultimately alleviate, such risks. Wish You Could Be a Kid Again? In March 2010, Wachovia settled the biggest action brought under the US bank secrecy act, through the US district court in Miami. Is This Property Developer China Evergrande 2.0? After the war, Taylor became a member ofTammany Hall, served on a commission that whitewashed the corrupt Tweed Ring that controlled New York City politics, and invested with Tweed in a series of business ventures. Jose Trevio used intermediaries to buy the horses at auctions in Oklahoma, New Mexico and California. Bloomberg Business News gave a detailed account on Nov. 20 of Citibanks repeated and long-running non-compliance with bank regulations about reporting suspicious activities. He tours the world for a consultancy he now runs, Hermes Forensic Solutions, counselling and speaking to banks on the dangers of laundering criminal money, and how to spot and stop it. More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn - a sum equivalent to one-third of Mexico's gross. But I tell them: 'You got to think big. His speciality, he explains, was his application of a "know your client", or KYC, policing strategy to identifying dirty money. He was ordered by Mexican prosecutor Cuevo Trejo to pursue Abrego, to convince him to turn himself in. The so-called "deferred prosecution" detailed in the Miami document is a form of probation whereby if the bank abides by the law for a year, charges are dropped. Maintaining his fathers interests in Mexico, during the 1870s James brokered a civil war that overthrew the Mexican government. On 10 April 2006, a DC-9 jet landed in the port city of Ciudad del Carmen, on the Gulf of Mexico, as the sun was setting. Buying a Home in California Is Already Hard. And among his first reports to his superiors at the bank's headquarters in Charlotte, North Carolina, were observations on a shortfall in KYC at Wachovia's operation in London, which he set about correcting, while at the same time implementing what was known as an enhanced transaction monitoring programme, gathering more information on clients whose money came through the bank's offices in the City, in sterling or euros. "With these crises," says Costa, "the banking sector was short of liquidity, the banks exposed themselves to the criminal syndicates, who had cash in hand. But rather than launch an internal investigation into Woods's alerts over Mexico, Woods claims Wachovia hung its own money-laundering expert out to dry. A spokesman for the bank, a unit of Citigroup Inc. , said it aimed to satisfy all federal rules that target money laundering. It was also revealed that rogue bodyguards for bank executives in Mexico were separately accused of taking kickbacks. Shares of Citigroup were little changed on Monday, closing down 0.07 percent, at $61.06. Timothy A. Clary/Agence France-Presse Getty Images. Jos Luis Marmolejo, who prosecuted those running one of the casas de cambio at the Mexican end, said: "Wachovia handled all the transfers. 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