By Aruna Viswanatha and David Henry
March 26 The Federal Reserve has ordered
Citigroup Inc to better police for the risk of money
laundering, part of a broad U.S. regulatory crackdown on the
potential for illicit money flows.
The Fed told Citigroup's board to submit a plan within 60
days to improve its oversight of companywide anti-money
laundering compliance, according to a consent order dated March
21, but only made public on Tuesday.
The order expands upon similar directives aimed at several
Citigroup units in 2012.
The board plan should include funding personnel and
resources based on the risks of different units - policies that
instill a "proactive approach" to identifying and managing
money-laundering risks - and measures to ensure employees adhere
to those compliance policies, the Fed said.
The Fed also ordered Citigroup to submit a plan to improve
its compliance operations that deal with anti-money laundering
and sanctions requirements, and complete a review of how
effective its firmwide compliance program is within 90 days.
Citigroup is expected to submit progress reports each
quarter detailing the actions it takes to comply with the order,
the Fed said.
Citigroup said in a statement that it had made "substantial
progress" in strengthening its compliance program and addressing
risks throughout the company.
"Citi continues to take the appropriate steps to address
remaining requirements and build a strong and sustainable
program," the bank said.
U.S. authorities have stepped up enforcement of anti-money
laundering laws in an effort to clamp down on conduct ranging
from drug trafficking to terrorism, and have entered into cease
and desist orders with top banks including JPMorgan Chase
and others related to weak internal controls.
In December, HSBC Holdings Plc agreed to pay a
record $1.9 billion, in part to resolve charges that it failed
to detect money from drug trafficking which was flowing from
Mexico into the United States.
Citibank, Citigroup's consumer and commercial bank, entered
into a consent order with the Office of the U.S. Comptroller of
the Currency in April 2012 to fix problems with its compliance
with the Bank Secrecy Act, the law that requires banks to report
suspicious activity to regulators.
Last August, the FDIC and the California Department of
Financial Institutions also ordered the U.S. arm of Citigroup's
Mexican subsidiary, Banamex USA, to address problems with its
The Fed did not specifically say how much Citi has done to
fix the issues raised by the previous orders. It said it is
requiring the bank to "continue ongoing enhancements," and said
that last year's settlements showed that Citigroup also needed
to address compliance weaknesses at the holding company level.
"As evidenced by the deficiencies ... that led to the
issuance of the OCC and FDIC consent orders ... Citigroup lacked
effective systems of governance and internal controls to
adequately oversee the activities of the Banks," the Fed said in
The Fed did not give specific examples of problems at
Citi neither admitted nor denied the Fed's findings under
the order, the U.S. central bank said.
Citigroup's global reach highlights its potential risks for
being used to launder money.
In its annual report filed in February, for example,
Citigroup disclosed that some of its Citibank branches and ATMs
in the United Arab Emirates, Bahrain, Lebanon and Venezuela are
required to participate in local government-run clearing and
exchange networks that include banks that the U.S. government
has sanctioned for ties to Iran.
The bank said it was pursuing licenses for the activity from
the Treasury Department in order to avoid violating U.S.
Regulators have said that generally, they plan to
investigate individuals who contribute to anti-money laundering
compliance failures at financial institutions.