(Corrects headline to show probe
is over legal compliance)
March 3 (Reuters) - A federal
grand jury is probing Citigroup Inc, including its Banamex USA affiliate, over compliance
with the U.S. Bank Secrecy Act and anti-money laundering requirements, the
company said.
In an annual filing on Monday with the U.S.
Securities and Exchange Commission, the company said the probe includes subpoenas from the U.S.
Attorney's Office for the District of Massachusetts.
The company also said Banamex USA
had received a subpoena from the U.S. Federal Deposit Insurance Corp. While the
U.S. attorney may bring criminal charges, the FDIC is a civil agency.
The criminal probe follows other
problems that have surfaced with Banamex, which operates Citigroup's largest
single consumer bank outside of the United States and has been portrayed by the
company as a model of its global strategy.
Separately, Citigroup disclosed
it had received a grand jury subpoena seeking information about two mortgage
securities that were issued in the middle of 2007.
It is the first time the bank has
raised the prospect of involvement in a criminal case concerning the sale of
mortgage bonds prior to the 2008 financial crisis. Reuters had reported in
December that U.S. authorities were preparing civil fraud charges against Citigroup
over the sale of flawed mortgage securities.
The bank also said on Monday it
had received several subpoenas and
requests for information from
several state attorneys general and the SEC about its mortgage bond business.
MEXICAN INVESTIGATION
Mexico's banking regulator said
on Monday it is also investigating whether Banamex committed crimes or flouted regulations.
"Inside Banamex we are
looking at the documentation that they provided and the operation of the whole
bank to determine these possible crimes or deviations from the
regulations," Jaime Gonzalez, President of the Comision Nacional Bancaria
y de Valores (CNBV), said in an interview on Mexico's Radio Formula.
Gonzalez said he hoped to have
conclusions from the investigation in two to three weeks.
Citigroup disclosed on Friday
that it had discovered at least $400 million in fraudulent loans in its Banamex
subsidiary in Mexico and said employees might have been involved in the apparent
crime.
Law enforcers from the Mexican
Attorney General's office and from the U.S. Federal Bureau of Investigation and
Securities and Exchange Commission are investigating the transactions, people familiar
with the probes have said.
Banamex made the loans to Mexican
oil services company Oceanografia on the basis of payments due for services provided to Mexican state-owned oil
company Pemex.
But
Citigroup said it could not validate that Pemex owed $400 million to
Oceanografia, or more than two-thirds of the invoices it had used as collateral
for its loans.
In the third quarter of 2013
problems with about $300 million of loans that Banamex had made to three
Mexican homebuilders prompted Citigroup to book reserves for expected losses.
Citigroup Chief Executive Michael
Corbat called the incident a "despicable crime" when it was first
disclosed and said then the bank believes it was an isolated episode. He also
said that criminal actions by Mexican authorities might allow Citigroup to
recover damages.
Citigroup is the third-largest
U.S. bank by assets. The company views its international business as a
competitive advantage over other big banks in the United States.
(Reporting by David Henry and
Jonathan Stempel in New York, Christine Murray in Mexico City and Aruna
Viswanatha in Washington; Editing by Lisa Von Ahn and Sofina Mirza-Reid)
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