Banamex USA, a Century City unit of Citigroup Inc. that served customers doing business in Mexico and the U.S., has agreed to shut down and pay $140 million in penalties to settle state and federal money-laundering probes.
Citigroup said in a news release Wednesday that it would “wind down” Banamex USA, the former California Commerce Bank, in an “ongoing and orderly” liquidation. Its offices in Houston and San Antonio also will be closed.
The operation had $1 billion in assets, $700 million in deposits and 394 employees as of March 31, its regulatory filings show.
The penalties include $100 million imposed by the Federal Deposit Insurance Corp. and $40 million assessed by California regulators. The state penalty is the largest ever levied against a bank by the Department of Business Oversight, the department said.
“Banamex agreed three years ago to correct numerous weaknesses in its anti-money laundering program. It has failed to do so,” said Jan Lynn Owen, commissioner of the business oversight agency. “This new agreement holds Banamex appropriately accountable for its continued violations.”
The settlements stem from a federal government squeeze on conduits for drug money and terrorism funding.
The crackdown affected not only giant banks like Citi, but smaller ones, such as one-branch Merchants Bank in Carson, a money-transmitting specialist that in February cut off the service to many countries, including struggling Somalia, under pressure from authorities.
Banamex is an arm of Banco Nacional de Mexico, Mexico’s second-largest bank, which is owned by Citigroup. The U.S. operation was set up to make it easier for businesses and individuals to transfer funds across the border.
Banamex signed an agreement with the FDIC and the state oversight agency in August 2012 that required actions in more than 20 areas to correct alleged violations of the federal Bank Secrecy Act, which governs anti-money laundering programs, and requirements to report suspicious activity by customers.
Despite that consent order, regulators said they later found numerous new violations of the federal law and of regulators’ anti-money laundering mandates over an extended period of time.
Citigroup, which has extensive international operations, had previously disclosed significant problems at Banamex on both sides of the Mexican border.
The Wall Street giant was forced to reduce its previously reported 2013 pre-tax earnings by $360 million early last year as a result of fraud affecting its Mexican bank.
Authorities in Mexico also fined Banamex in that case, and Citi said the U.S. Securities and Exchange Commission and the Justice Department were looking into the matter.
In addition, Citi has reported, the U.S. attorney in Boston, the FDIC, the state oversight agency and the U.S. Treasury Department’s Financial Crimes Enforcement Network are investigating Banamex activities.
Follow @ScottReckard for news of banks and home loans.