- LONDON (CNNfn) - Citibank secretly transferred up to $100 million in
alleged drug money for the brother of the former Mexican president, and
violated its own internal controls on money laundering, according to a
government report due Friday.
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- The report, by Congress' investigative
arm the General Accounting Office, accuses the U.S.'s second largest bank
of facilitating "a money-managing system that disguised the origin,
destination and beneficial owner of the funds," according to reports
published in U.S. newspapers.
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- The GAO report, entitled "Raul Salinas,
Citibank and Alleged Money Laundering," could lead to congressional
hearings against Citibank in the new year. Salinas is the eldest brother
of Carlos Salinas de Gortari who served as Mexican president between 1988
and 1994.
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- There have been repeated rumors that
Salinas was linked to drug lords. But according to the report Citibank's
private banking unit asked Salinas few questions when approached by him
in 1992.
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- As a mid-level government employee Salinas
earned less than $200,000 a year. But between 1992 and 1994 he moved more
than $90 million through Citibank accounts. Checks worth millions of dollars
were taken by hand to Citibank Mexico by Salinas' wife Paulina. The money
was then moved to Switzerland through a complex series of international
transactions.
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- Citibank has its own "know-your-customer"
procedures, which it failed to follow in the Salinas case, according to
the GAO.
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- It was only after Salinas was charged
with murder in 1995 that Citibank investigated the source of funds.
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- Even then, according to a bank representative,
"Citibank New York's Mexican division believed that all of Mr. Salinas'
funds had been obtained legally, with a large portion resulting from the
sale of a construction company he owned," according to the report.
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- "However Citibank reportedly knew
no details about the construction company, including its name, who had
purchased it, or the amount of money generated by its sale."
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- GAO investigators also criticize the
bank for establishing a Cayman Islands trust to disguise the source and
destination of Salinas' money.
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- Salinas has denied any wrongdoing, saying
that the money came from Mexican industrialists who wanted him to establish
an investment fund.
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- In a statement Citibank said the report
"contains gross errors of fact and interpretation" and "ignores
recent progress in strengthened law and industry procedures which Citibank
strongly supports in keeping with our commitment to combat money laundering,
to comply with the letter and spirit of related laws and to continually
strengthen our procedures everywhere we operate."
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- Spokesman Dick Howe, added, "We
have looked into the matter ourselves and have found that neither the company
nor any employee has violated the law. We're cooperating fully with law
enforcement authorities."
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- The GAO said it was unable to determine
whether Citibank broke U.S. money laundering laws. But the Justice Department
is also investigating the company's actions.
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- No law specifically requires banks to
know their customers but money laundering - concealing the source of funds
obtained from illegal activity including drug sales - is illegal.
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- Salinas is in prison, being tried for
murder.
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- Citibank is now part of the Citigroup
following its merger with Travelers.
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- http://cnnfn.com/worldbiz/9812/04/citibank/
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