By Christina Rexrode And Emily Glazer
Citigroup Inc. said Wednesday that the Treasury Department and
California regulators are looking into its Banamex USA unit.
The Treasury and regulators have asked for information related
to the bank's compliance with anti-money-laundering rules,
according to Citigroup's annual report. The inquiries came from the
Financial Crimes Enforcement Network, known as FinCEN, which is
part of the Treasury Department, and the California Department of
Business Oversight.
The disclosure came on a day when financial-services companies
including Morgan Stanley, Wells Fargo & Co., Discover Financial
Services and BB&T Corp. released their annual SHYreports.
Last year, Citigroup said the Banamex USA unit had received
grand-jury subpoenas from the U.S. attorney's office of
Massachusetts and a subpoena from the Federal Deposit Insurance
Corp., both related to the unit's compliance with rules meant to
prevent money laundering.
Citigroup didn't give any update on those investigations, but it
did say it is "cooperating fully" with the inquiries.
Banamex USA is a deposit-taking bank based in California, which
serves customers who need to move money across the U.S.-Mexico
border. Citigroup inherited the operation when it bought Banamex, a
large Mexican bank, in 2001.
The disclosure is the latest headache stemming from Citigroup's
Mexico-related activities and is part of a broader focus by U.S.
regulators on money-laundering issues globally.
The FDIC and the California regulators previously filed a
consent order against Banamex USA in 2012, telling the bank to
create better processes for identifying high-risk customers, among
other changes. The bank agreed to make the changes but didn't admit
or deny wrongdoing and didn't pay a fine.
Separately, Wells Fargo updated investors on its long-running
legal tussle with the Federal Housing Administration, suggesting
the matter may take longer to resolve after settlement discussions
fell apart.
The San Francisco-based bank, which has been in litigation with
the FHA since 2012, said in its annual report that the "previous
resolution discussions" with the FHA "did not result in an
acceptable final agreement" and that the bank is "again engaged in
discovery."
Wells Fargo had been in talks with the U.S. attorney in the
Southern District of New York and the Justice Department for months
over allegations it improperly certified certain FHA mortgage loans
for U.S. Department of Housing and Urban Development insurance that
didn't qualify for the program.
The government alleges Wells Fargo shouldn't have received
insurance proceeds from HUD when some of the loans later
defaulted.
It also alleges the bank may have known that some of the
mortgages didn't qualify for the insurance to begin with, and that
Wells Fargo didn't disclose those deficiencies to HUD before making
the insurance claims. Wells Fargo has appealed parts of the
lawsuits in court but so far has been denied. The bank has declined
to comment further on the case.
The discussions almost came to a resolution late this past
summer when the bank was in negotiations with the U.S. attorney's
office on a settlement for under $500 million, people familiar with
the matter said.
But several months ago, the Justice Department asked the bank
for additional evidence, the people added.
Write to Christina Rexrode at christina.rexrode@wsj.com and
Emily Glazer at emily.glazer@wsj.com
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