Fed orders Citigroup to tighten controls on money laundering

The Federal Reserve hit Citigroup Inc. with an enforcement action Tuesday over breakdowns in money-laundering controls that threatened to allow tainted money to move through the United States.

The Federal Reserve took aim at Citigroup and a subsidiary, Banamex USA, over failure to monitor cash transactions for potentially suspicious activity.

Under the Bank Secrecy Act, financial institutions like banks and check-cashing services must report any cash transaction of more than $10,000 and bring any dubious activity to the attention of regulators.


The federal law also requires banks to have complex controls in place to detect criminal activity. Porous monitoring, the authorities say, can enable drug dealers and terrorists to launder money through the United States.

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Citigroup and Banamex USA, the US branch of the bank’s Mexican unit, did not admit wrongdoing, and no fines were issued Tuesday related to the lapses.

As part of a broad crackdown on the movement of illicit money through the United States, the Justice Department, and the Manhattan district attorney’s office have aimed at foreign banks that have branches on US soil.

Prosecutors have accused several foreign banks of flouting US law by funneling billions of dollars on behalf of sanctioned nations, like Iran and North Korea.

The Federal Reserve faulted Citigroup for lacking ‘‘effective systems of governance and internal controls to adequately oversee the activity.’’


Under the action, the bank’s board must outline a plan to fortify its monitoring of transactions and bolster its compliance program. including how to finance a ‘‘compliance risk management program that is commensurate with the compliance risk profile of the organization.’’

The move by the Federal Reserve adds to a cease-and-desist order brought against the bank by the Office of the Comptroller of the Currency in April. The comptroller accused the bank of violating the Bank Secrecy Act, a federal law that requires banks to rout out tainted cash by filing suspicious-activity reports.

‘‘Citi has made substantial progress’’ in improving its compliance and addressing money laundering risks ‘‘in a comprehensive manner across products, business lines and geographies,’’ a bank spokeswoman said. ‘‘Citi continues to take the appropriate steps to address remaining requirements and build a strong and sustainable program.’’

In December, HSBC agreed to a record $1.92 billion deal with authorities to settle accusations that it transferred billions of dollars for nations like Iran and enabled Mexican drug cartels to move money through its IS subsidiaries.