Citigroup Inc said it would shut its Banamex USA operations and pay $140 million to regulators who alleged the bank did not correct weaknesses they had found in 2012 in its anti-money laundering programs.
The fine, imposed by the Federal Deposit Insurance Corp, includes $40 million in civil penalties to be paid to California’s Department of Business Oversight.
“Banamex agreed three years ago to correct numerous weaknesses in its anti-money laundering program. It has failed to do so,” Jan Lynn Owen, commissioner of the California authority said in a statement on Wednesday.
California-based Banamex USA is an affiliate of Banco Nacional de Mexico (Banamex), which Citigroup bought in August 2001. Banamex USA had $1.5 billion of assets at the end of 2012, and at one point as many as 11 branches, eight of which were closed in 2013.
The payment, the largest by a bank to the California regulator, resolves allegations that Banamex USA violated federal laws requiring banks to maintain adequate anti-money laundering programs, the California regulator said.
A federal grand jury and the U.S. Attorney’s office in Massachusetts have also been investigating the Banamex USA’s compliance with anti-money laundering requirements and the Bank Secrecy Act, Citigroup has previously disclosed.
A bank spokeswoman declined to comment on the status of that criminal investigation. The bank previously said it was cooperating with that probe and with the FDIC and California investigations.
Citigroup said it a statement on Wednesday that it will liquidate Banamex USA, which now has three branches, 300 full-time employees and $500 million of assets.
“Banamex USA has not been able to operate to the scale necessary to generate consistent quality earnings,” Citigroup said. Closing Banamex fits with Citigroup’s drive to simplify its business model, the statement said.
Mexico City-based Banamex embarrassed Citigroup last year when it lost more than $500 million on fraudulent loans to a supplier to the state-owned oil company.
Wednesday’s settlement comes a day after Citi’s consumer bank was ordered by the U.S. Consumer Financial Protection Bureau to pay $770 million for illegal credit card practices.
Citigroup said it had set aside reserves to cover the Banamex USA and credit card settlements.
Citi shares were up 2.39 percent at $60.45 in afternoon trading on the New York Stock Exchange.
(Reporting by Richa Naidu and Anil D’Silva in Bengaluru and David Henry in New York. Additional reporting by Jim Christie in San Francisco.; Editing by Chizu Nomiyama and Kirti Pandey)
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