Citibank has discovered that helping the government isn't always a good idea.

The New York giant tipped off the feds in March to questionable activity at a branch in the Bronx. Citibank agreed to keep open suspicious accounts while law enforcement officials monitored them for money laundering.

An investigation ensued, and last month the U.S. Attorney's office began one of the largest money-laundering cases ever in New York.

The agency's Nov. 30 press release listed 17 charges against 23 defendants. The only mention of Citibank was a description of how a crooked employee helped launder money through the bank.

"It made it look like Citibank was asleep at the wheel," said an industry source.

For Citi, the case turned into a public relations nightmare. But the outcome could be even worse. Even if a bank is asked by the government to keep an account open, it could end up being prosecuted for money laundering.

For example, if the government agent who promises the bank immunity is transferred, the bank's protection may be gone as well.

The key defense, say experts, is to get the request in writing, which Citibank did. The bank's problem could have been a lot worse if there had been no record of the government's directive.

Law-enforcement agencies are monitoring about 150 accounts they have asked banks to keep open, according to Richard Small, the Federal Reserve Board's point man on money laundering.

Banks are asked to keep accounts open to avoid tipping the customer off. The open account also gives the government time to gather more evidence or study a pattern of money-laundering activity.

But bankers are unsure what liabilities they face in these cases, according to John Byrne, senior legislative representative at the American Bankers Association.

"In the 10 years I've been working on this issue, the question has never been answered," he said.

The situation is so unclear that the ABA plans to lobby for legislation in this Congress to protect bankers.

Mr. Byrne said he would bring up the matter at the March meeting of the Bank Secrecy Act Advisory Group, a consortium of bankers, regulators, and trade group members that meet to discuss money-laundering issues.

ABA plans to push for a limited safe harbor for banks, which would guard a bank from prosecution in return for cooperation with a government agency.

Right now, banks could be prosecuted even if they cooperate, said both Mr. Small and Mr. Byrne.

"You are taking a chance unless you get a letter," Mr. Byrne said.

Mr. Small advises bankers to close the account if they don't get a written request.

"If the government really wants to keep an account open, they should be willing to put it in writing," Mr. Small said.

If the bank ends up in a battle over closing the account, Mr. Small said, it should seek support from its regulator.

"Banks should complain like hell if they get criticism for closing the account," Mr. Small said. "We as regulators would stand behind a bank if it closed an account."

Although having a letter may protect banks from prosecution, it won't get them recognition for helping the government, as Citibank learned.

Citibank should have asked the U.S. Attorney's office to be involved when the prosecution was announced, said Mr. Small, possibly by issuing a joint press release.

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