Banamex USA, a Mexican unit of Citigroup, will pay $97.44 million and enter into a non prosecution agreement to settle allegations the company violated the Bank Secrecy Act.
Banamex and Citigroup were represented by Brad Karp and Susanna Buergel of Paul Weiss in New York.
The non prosecution agreement came under immediate fire from corporate crime experts in the United States.
“Again, a crime and no crooks,” said Public Citizen’s Bart Naylor. “Attorney General Jeff Sessions plans to renew mass incarceration of minor drug offenders. With this settlement, he’s also reassuring mega bankers that a different standard applies to them.”
The case involved more than 18,000 alerts covering $142 million in what the Department calls ‘potentially suspicious remittance transactions’ at Banamex USA.
The Department charged that the firm made at least $92 million in these transactions – but it is requiring Citi to forfeit only $97.4 million, Naylor said.
“This agreement technically doesn’t protect individuals from future prosecution,” Naylor said. “But the Department sacrifices leverage by settling this case now, since final penalties could be conditioned on cooperation. What’s more, the Department identifies four individuals already sanctioned by bank regulators, indicating that the government already knows at least some responsible actors.”
“The Bank Secrecy Act makes it a crime to ‘willfully fail to establish and maintain’ a robust anti-money laundering compliance program. Details released by the Department show that between 2007 and 2012, the firm processed more than 30 million remittances to Mexico covering $8.8 billion with ‘virtually no investigation for suspicious activity.’ In one instance, a Mexican beneficiary received 1,400 remittances from more than 950 different senders in 40 different states in the U.S. But the Citi subsidiary never filed a ‘suspicious activity report,’ which is a bank investigation of the issue.”
Public Citizen’s Rob Weissman said that while Sessions wants to throw the book at nonviolent drug offenders and apply the harshest possible treatment to immigrants in this country without authorization, “he turns into Marshmallow Sessions when it comes to corporate crime.”
“Citigroup admitted to criminal violations of anti-money laundering obligations, but will face no criminal prosecution,” Weissman said. “Instead, the company enters into a discredited non-prosecution agreement, which amounts to little more than a promise not to break the law in the future. In Donald Trump and Jeff Sessions’ America, it turns out, crime does pay – so long as you incorporate.”
Brandon Garrett, a professor of law at the University of Virginia School of Law and author of Too Big to Jail, said that he hopes “this is not a sign of a trend towards a kid-gloves approach towards corporate crime in the new administration.”
“The vast majority of Bank Secrecy Act cases have been resolved through plea agreements and deferred prosecution agreements,” Garrett said. “Only six of 54 resolutions since 2001 have involved non-prosecution agreements.”
Why is this a non-prosecution agreement?
“It’s unclear,” Garrett said. “It is noteworthy that not only is this a non-prosecution agreement, but the parent, Citigroup is only a party to parts of the agreement and is not a named party. It is particularly odd where the agreement notes that this company ceased all banking operations and dissolved.”
“It is also odd that the result was a non-prosecution agreement, where the company’s cooperation was not initially adequate, according to the agreement. Why no oversight of Citigroup was required, why the ongoing oversight by regulators was thought to be enough, is all left unclear.”
“The agreement is only a one-year agreement as well – it is short – so one wonders how well compliance can be improved in that time.”
Banamex was a small three unit Citigroup branch that posed big problems for the parent. In 2015, Citigroup announced that it was closing the bank.
Banamex admitted to criminal violations for willfully failing to maintain an effective money laundering compliance program and controls to guard against money laundering and for willfully failing to file suspicious activities reports.
Banamex admitted to processing more than 30 million remittance transactions to Mexico with a total value of more than $8.8 billion.
During the same period, Banamex’s monitoring system issued more than 18,000 alerts involving more than $142 million in potentially suspicious remittance transactions.
But the company conducted fewer than ten investigations and filed only nine suspicious activity reports in connection with these 18,000-plus alerts, filing no such reports on remittance transactions between 2010 and 2012.
Banamex also admitted that, for several years, the company recognized that it should have improved its monitoring of remittances but failed to do so.
Banamex employed a limited and manual transaction monitoring system, running only two scenarios to identify suspicious activity on the millions of remittance transactions it processed.
These two scenarios produced paper reports that were intended to be reviewed by hand by the two employees assigned to perform the BSA functions of the bank, in addition to time-consuming non-Bank Secrecy Act responsibilities.
As Banamex began to expand its remittance processing business in 2006, the company understood the need to enhance its anti-money laundering efforts, yet failed to make necessary improvements to its transaction monitoring controls or to add staffing resources.
In July 2015, in a related matter, the Federal Deposit Insurance Corporation (FDIC) and California Department of Business Oversight ordered Banamex to pay a $140 million civil money penalty to resolve separate Bank Secrecy Act regulatory investigations.
The combined penalties paid by Banamex associated with the criminal and regulatory investigations of its BSA compliance violations amount to approximately $237.44 million.
In March 2017, the FDIC also announced related enforcement actions against four former senior Banamex executives.
As part of those actions, two executives were fined and prohibited from working at financial institutions in the future, one was fined, and one was prohibited from working at financial institutions in the future.
The Justice Department outlined the reasons it entered into a non prosecution agreement with the company.
The Justice Department said that Banamex engaged in extensive remedial actions, including devoting significant resources to remediation of the deficiencies and ultimately ceased all banking operations at Banamex.
Banamex received partial credit for its cooperation with the Justice Department’s criminal investigation, including making factual presentations, voluntarily making foreign-based employees available for interviews in the United States, producing documents from foreign countries in ways that did not implicate foreign data privacy laws, and collecting, analyzing and organizing voluminous evidence and information for the Justice Department, including identifying and providing documents relating to certain individuals and topics.
But the government said the company’s initial efforts to provide relevant facts and documents “were neither timely nor substantial.”
The non prosecution agreements says that Banamex USA had “no prior criminal history.”
Not true for Citigroup, which in May 2015 plead guilty with four other banks to fixing the prices on foreign exchange spot markets.
Pursuant to the non prosecution agreement, Citigroup agreed to cooperate fully in this and any other Justice Department investigation relating to violations of the Bank Secrecy Act and federal money laundering statutes and, for a period of one year, to report to the Justice Department any evidence or allegation of violations of the Bank Secrecy Act or money laundering laws.
Citigroup agreed to report to the Justice Department regarding implementation of compliance measures to improve oversight of its subsidiaries’ Bank Secrecy Act compliance.