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Citibank in drug cash probe
GAO report slams bank for secretly moving millions in alleged drug money
December 4, 1998: 10:56 a.m. ET
Citigroup's Dimon resigns - Nov. 02, 1998
Citibank Buys Into Microsoft-Supported E-Billing Venture - Sep. 14, 1998
General Accounting Office
NEW YORK (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, the General Accounting Office said Friday.
The GAO charged in a report that the second-largest U.S. bank facilitated "a money-managing system that disguised the origin, destination and beneficial owner of the funds."
The 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.
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.
As a mid-level government employee, Salinas earned less than $200,00 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 then was moved to Switzerland through a complex series of international transactions.
Starting in mid-1992, the GAO said, "Citibank actions assisted Mr. Salinas with these transfers and effectively disguised the funds' source and destination, thus breaking the funds' paper trail."
Citibank has its own "know-your-customer" procedures, which it failed to follow in the Salinas case, the GAO said.
It was only after Salinas was charged with murder in 1995 that Citibank investigated the source of funds.
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," the report states.
"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."
GAO investigators also criticize the bank for establishing a Cayman Islands trust to disguise the source and destination of Salinas' money.
Salinas has denied any wrongdoing, saying that the money came from Mexican industrialists who wanted him to establish an investment fund.
Citibank said in a statement 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."
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."
The GAO said it was unable to determine whether Citibank broke U.S. money laundering laws. But the Justice Department also is investigating the company's actions.
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.
Salinas is in prison, being tried for murder.
Citibank is now part of Citigroup (C) following its merger with Travelers.