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Fed orders Citigroup to develop anti-money laundering procedures

“We made substantial progress in strengthening our compliance with anti-money laundering rules,” says Citigroup.

The Federal Reserve System, informally known as the Fed, has ordered Citigroup to develop plans to strengthen its anti-money laundering procedures and adequately fund its risk-management programmes.

The US central banking system order came in the light of defects found at an affiliate of Citigroup’s Mexican banking arm, Banamex. Citigroup generated the largest part of its revenues from Banamex in Latin America last year.

In its annual report, Citigroup said its operations in emerging markets subjected it to higher compliance risks under US anti-money laundering rules.

Citigroup, in a statement, said on Tuesday, that it had made substantial progress in strengthening its compliance with anti-money laundering rules and addressing legacy AML risks and would continue to address outstanding areas.

The Federal Deposit Insurance Corporation and the California Department of Financial Institutions have found deficiencies at Banamex USA in 2012. Furthermore, the Office of the Comptroller of the Currency accused Citigroup’s main US banking unit of having insufficient internal controls.

HSBC has agreed to pay $1.9bn to settle accusations that it allowed itself to be used by money launderers in December 2012.

Since 2009, Standard Chartered, Barclays, ING, Credit Suisse and Lloyds have paid fines in the hundreds of millions of dollars for violating the US money laundering rules.

The US senators have criticised regulators for not considering criminal charges against large banks apart from fines. Earlier in March, Eric Holder, the US attorney-general, told Congress that some banks were too large and that their size impeded attempts to bring criminal prosecutions.

Elizabeth Warren, a member of the senate banking committee, asked regulators this month: “How many billions of dollars do you have to launder for drug lords and how many economic sanctions do you have to violate before someone will consider shutting down a financial institution?”

There were no fines as part of the Fed order.