its moment in the spotlight to argue for a set of anti-money-laundering standards for the private banking industry.
In his testimony to the Senate select subcommittee on investigations, John S. Reed, co-chairman and co-chief executive officer, is expected to push for stringent guidelines that would apply to Citi and its competitors around the world. The move appears to be an effort to preempt further governmental intervention in an area of increasing regulatory concern.
"All financial institutions -- whether banks, securities firms, or other types of financial intermediaries -- are potentially vulnerable to money laundering," said a prepared text of Mr. Reed's testimony. "I hope Congress will follow and support efforts by the private sector to establish uniform international anti-money-laundering standards.''
Last week Citigroup sent letters to private bankers worldwide calling for a common set of policies to combat money laundering.
Sen. Carl Levin, D-Mich., is expected to introduce legislation in the Senate either today or Wednesday, his office said in a press briefing Monday. The legislation, though not expected to be voted on in the current congressional session, is meant to address weaknesses in standards that were exposed during the Senate panel's money laundering investigation.
In addition, Mr. Reed is expected to say to the Senate select subcommittee that controls within Citi's private bank were "not satisfactory" in the mid-1990s but have substantially improved.
A Senate report released Monday concluded that Citibank executives were slow to react to the company's own highly critical audits of controls in its private banking unit in the mid-1990s. People familiar with the matter said Citi will face criticism for its handling of accounts for government officials as well as for transaction monitoring and a lack of uniform standards throughout its global private bank.
The Senate panel will focus on Citi's handling of private banking accounts controlled by Raul Salinas, the brother of former Mexican President Carlos Salinas de Gortari, according to people familiar with the case. Raul Salinas was suspected of laundering millions of dollars through Citibank in the mid-1990s.
The Citigroup holding company, the result of Citicorp's merger last year with Travelers Group, continues to deny wrongdoing, and a five-year-old federal investigation is continuing.
"The Salinas matter was one of the events that showed us, and all financial institutions, the necessity of stricter know-your-customer and transaction monitoring policies," said Mr. Reed's prepared text.
Citi has invested $75 million in its private bank to upgrade compliance procedures and install new technology to profile its 40,000 customers and their family members and associates. An automated transaction monitoring system is being tested in Mexico and is expected to be fully installed by yearend, those familiar with the matter said.
The hearing comes amid renewed concerns over the banking industry's ability to detect money laundering. In September, Thomas A. Renyi, chairman and chief executive officer of Bank of New York Co., admitted to the House Banking Committee that his company failed to adequately scrutinize wire transactions involved in alleged laundering of funds from Russia.
Mr. Reed will specifically acknowledge Citi's failure to follow its own procedures on customer profiling in setting up accounts for Raul Salinas, people familiar with the matter said. Mr. Reed is also expected to admit that the accounts were not monitored adequately.
One example of the changes at Citi: Shaukat Aziz, the former head of private banking who left the bank Oct. 29 to become Pakistan's finance minister, was required to show his Citi private banker a photo identification and provide additional information for his own customer profile, people familiar with the matter said.
Scott Barancik contributed to this story.
