Citigroup Inc. (NYSE: C) revealed last Friday that it had discovered a minimum of $400 million in fraudulent loans at its Mexican subsidiary Banamex. In a filing with the U.S. Securities and Exchange Commission (SEC) on Monday, the bank said that a federal grand jury is investigating Citigroup, as well as Banamex, over compliance with the U.S. Bank Secrecy Act and its anti-money laundering requirements.
Citigroup filed revised data for its fourth-quarter and full-year 2013 results indicating:
[O]perations for the fourth quarter of 2013 and full year 2013 were impacted by an estimated $235 million after-tax ($360 million pretax) charge resulting from a fraud discovered in Banco Nacional de Mexico (“Banamex”), a Citi subsidiary in Mexico, in February 2014. The fraud increased fourth quarter of 2013 operating expenses in Transaction Services by an estimated $400 million, with an offset to compensation expense of approximately $40 million associated with the Banamex variable compensation plan.
The bank said that the U.S. Attorney for the District of Massachusetts has issued subpoenas and that Banamex had received a subpoena from the Federal Deposit Insurance Corp. (FDIC). The U.S. attorney may file criminal charges, and the FDIC could file civil claims.
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