FDIC penalizes Banamex USA $140 million for AML failings, operation to close

The Federal Deposit Insurance Corp. is penalizing a Mexican-based Citigroup subsidiary $140 million for persistent anti-money laundering failures tied to the quality of internal controls, expertise of staff and ability to detect and report potential suspicious activities.

In conjunction with the penalty, Citi stated it was closing Banamex USA, an affiliate of Banco Nacional de Mexico (Banamex), which was acquired in 2001. As part of the action, the California Department of Business Oversight assessed a concurrent $40 million penalty, to be paid from the FDIC action.

Overall across the financial sector, this latest action is yet another example of federal and state regulators with oversight of financial crime programs taking a more aggressive stance against missteps, particularly those identified and not corrected in a given timeframe.

At the same time, that Citi would want to extricate itself from an operation that could potentially allow easier entry into the financial system for criminals, and the larger bank could be deemed at fault, is not a total surprise. Large US and international institutions have been engaging in a wide and deep “de-risking” process to thwart financial criminals and allow nitpicky examiners.

In the relatively short and terse FDIC action, the regulator noted that the anti-money laundering (AML) deficiencies persisted “over an extended period of time,” and that the operation didn’t adequately fix broad failings noted in an August 2012 consent order.

The compliance issues surrounding Banamex USA centered on the inability to capture and retain a qualified compliance officer with skill in line with the risk of the operation, have properly trained and a sufficient number of staff.

Exacerbating the bank’s inability to correct these issues is that is also had an ineffective independent testing program, according to the FDIC.

Banamex USA has assets of roughly $500 million, with some 300 employees in branches in California and Texas. The joint regulatory order can be found here.