WASHINGTON A Senate subcommittee on Friday asserted that Citibank executives willfully misled the Central Bank of Argentina during an investigation into money laundering at one of Citis correspondent banks there and that they turned a blind eye to signs that another bank wiring funds through Citi was dealing in dirty money.
The hearing, the second of three by the Senate Permanent Subcommittee on Investigations about the connection between correspondent banking and money laundering, focused mainly on Citibank Argentinas dealings with the Bahamas-licensed Federal Bank and M.A. Bank in the Cayman Islands.
The Citibank executives at the hearing were Jorge Bermudez, Citibanks executive vice president and head of e-business; Carlos M. Fedrigotti, vice president of the country corporate office of Citibank Argentina; and Martin Lopez, vice president and corporate bank head of Citibank South Africa, who was at Citibank Argentina until last year.
The hearings grew out of an investigation conducted by the staff of Michigan Sen. Carl Levin, the panels ranking Democrat, which found that correspondent accounts in U.S. banks are frequently used by money launderers.
The Central Bank of Argentina, in an April 1999 letter, asked that Citibank Argentina supply it with all information the branch may have about Federal Bank and specifically requested information that would establish the identity of its shareholders.
Despite the fact that the Citibank Argentinas files contained an internally generated organizational chart of the subsidiaries of Federal Banks parent company, Citibank replied that its records contain no information that would enable us to determine the identity of the banks owners.
Months later, Citibank supplied a copy of the organizational chart to the central bank.
Mr. Lopez told the subcommittee that the banks initial response was the result of a misunderstanding about what the regulators were asking for an assertion that Sen. Levin ridiculed.
I dont buy it, he said. That they reply to the regulatory authority that there is nothing that they have relative to that subject is so flat-out wrong that I am not satisfied with their answer.
Subcommittee Chairman Susan M. Collins, R-Maine, also took the bankers to task for maintaining a relationship with M.A. Bank after Citibank was served with a seizure order by law enforcement officials who informed them that $7.7 million in the banks account was believed to be from illegal drug proceeds.
Mr. Bermudez called the problem the result of a breakdown in communications that he termed an embarrassment. The banks procedures have been corrected, he said.
While we are constantly working to improve our anti-money-laundering controls, the reality is that it is difficult for the industry, as well as law enforcement, to keep up with the latest schemes employed by money launderers as we review the 145,000 wire transfers we process each day.