The focus of money laundering investigations is shifting from private banking operations to correspondent banking relationships.
On the heels of congressional hearings into the anti-money-laundering safeguards in Citigroup's private banking unit, new reports surfaced Friday that in 1997 a New York branch of Citibank was used in channeling $10.8 million of tainted money to the late drug lord Amado Carrillo Fuentes, who was trying to set up operations in Argentina at the time.
A staff member of the Senate Governmental Affairs Committee's subcommittee on investigations said the next phase of the panel's work would be to look into correspondent banking and that its investigators were familiar with the money transfers in question. Anti-money laundering legislation has been introduced in both chambers of Congress.
Mexico's representative to Interpol, the international police organization, told reporters in Mexico City that a money-laundering investigation by Mexican police, U.S. Customs officials, and Argentine police had led to the seizure of records from Mercado Abierto Bank, an investment house in Buenos Aires.
The Argentine firm kept an account in Citibank New York that was used to funnel the $10.8 million to Mr. Fuentes and his lieutenants, according to the Interpol representative, Juan Miguel Ponce Edmondson.
An unidentified Citibank official told La Nacion, a Buenos Aires newspaper, that the bank had acted as a branch bank for money transferred between Bank of America and Mercado Abierto, though Citibank was not familiar with the origins or destinations of the funds.
Contacted for comment, a Citibank executive referred calls to the media relations department, which did not return two phone calls.
At the time of the money transfer, Mr. Fuentes was on the run in Mexico and trying to set up operations in South America.
Mr. Fuentes, reputed head of the violent Juarez cartel, died from complications following plastic surgery in Mexico City in July 1997.
The money reportedly sent through the Citibank account was said to have been discovered through last year's "Casablanca" money-laundering sting conducted by U.S. Customs.
In an advertisement in Argentine newspapers Friday, Mercado Abierto denied it had laundered money and said funds now under investigation had been transferred from leading U.S. banks into Mercado Abierto's own accounts with leading banks in New York.
The reported transaction could be yet another embarrassment for Citigroup, whose private banking policies were at issue in recent Senate hearings in November. In congressional testimony, Citigroup co-chairman John Reed called for self-policing by the industry as a preferable alternative to new laws or regulations.
Dow Jones and Bloomberg News contributed to this report.