The U.S. Justice Department is looking into Citigroup Inc.'s dealings with companies linked to Mexican billionaire Carlos Hank Rhon as part of an expanding investigation into the bank's money-laundering controls.
In a subpoena issued earlier this year, U.S. officials asked Citigroup to provide information on accounts tied to four businesses affiliated with Hank Rhon, according to documents reviewed by Bloomberg. These include two units each of Grupo Financiero Interacciones SA and Grupo Hermes SA, which are controlled by Hank Rhon and his family. The Justice Department asked the bank to provide similar paperwork for a fifth firm, Banco Monex, that's not connected to Hank Rhon; for a number of money-transfer businesses, and less-detailed information on more than a dozen other companies.
The documents indicate the Justice Department is examining anti-money laundering practices at Banco Nacional de Mexico, Citigroup's Mexico unit known as Banamex, and investigating whether any of its clients were involved in money laundering.
The broadening probe could touch one of Mexico's most powerful magnates. Hank Rhon, a businessman involved in banking, construction and heavy industry, is the son of Carlos Hank Gonzalez, a longtime force in Mexico's ruling party who died in 2001.
None of Hank Rhon's companies have been accused of wrongdoing, nor has he. A spokesman for his companies said the firms weren't the targets of the investigation.
Citigroup is under pressure to clean up its compliance procedures globally after it said a security unit in Mexico committed fraud. A loan fraud, also in Mexico, erased $235 million from 2013's results. The Mexican unit accounts for almost 10 percent of the New York-based bank's revenue and has about 1,500 branches.
Citigroup Chief Executive Officer Michael Corbat said in April the bank plans to have 30,000 people working in regulatory and compliance functions by the end of the year, an increase of about 15 percent from the end of 2014.
Molly Millerwise Meiners, a spokeswoman for Citigroup, declined to comment, as did a spokesman for Monex.
Two of the companies named in the subpoena -- Interacciones Casa de Bolsa SA and Aseguradora Interacciones SA -- are brokerage and insurance units of Grupo Financiero Interacciones, the parent company that's controlled, directly and through a trust, by Hank Rhon and family, according to the Mexico City- based financial-services firm's 2014 annual report. The stake has a market value of about $1.1 billion.
Interacciones said its companies have acted in accordance with the "best practices of corporate governance and in compliance with strict controls to prevent money laundering and terrorism financing." It said the companies aren't part of any investigation. "What's being investigated, according to our understanding, are Citibank's processes in this area," it said in an e-mailed statement.
Hank Rhon couldn't be reached for comment, according to Fernando Solis-Camara, a spokesman for Interacciones and Hermes.
Other businesses named in the subpoena, Cerrey SA and its U.S. unit Cerrey USA, are parts of one of Latin America's largest makers of steam generators. Cerrey is majority-owned by Grupo Hermes, a closely held firm founded and run by Hank Rhon. The companies aren't part of an investigation, Cerrey said. Cerrey has always conducted business "in compliance with national and international best practices," it said in an e- mailed statement.
Wyn Hornbuckle, a Justice Department spokesman, declined to comment.
The Justice Department had Mexican regulators deliver the subpoena to Citigroup's Banamex unit in Mexico in January, according to the documents, as part of an investigation that began with Banamex USA, a small California-based lender that sends money between Mexico and the U.S.
It's asking for signature cards, account opening paperwork, "know-your-customer" risk assessments, account ledger cards and correspondence, including e-mails, electronic messages, instant messages and memos about the accounts. The Justice Department is seeking a similar level of detail about Banco Monex.
As part of the same subpoena, the government has asked Banamex for less-detailed information on about a dozen other companies. It's only asking for due diligence or know-your- customer checks performed by the bank on accounts held by a number of retailers and others. They include the Mexican units of U.S. retailers Costco Wholesale Corp. and Home Depot Inc., American Express Co., HSBC Mexico and its Bital unit, the Mexican operation of San Antonio-based HEB Grocery Co. and Telecomunicaciones de Mexico.
There's no indication those companies were involved in money laundering or other illicit activity, according to a person familiar with the matter.
"We're not aware of the subpoena or any concerns arising from the Home Depot's limited relationship with Banamex," Steve Holmes, a spokesman, said in an e-mail.
Costco Chief Financial Officer Richard Galanti declined to comment. Dya Campos, a spokeswoman for HEB, declined to comment, as did American Express and HSBC, a unit of HSBC Holdings Plc. Telecomunicaciones de Mexico didn't immediately respond to a request for comment.
There were other detailed requests concerning accounts linked to a dozen money-transfer businesses, including Western Union Co., the world's largest, and Banamex's monitoring of those transactions. Justice is asking Banamex for signature cards, electronic messages, correspondence and memorandums as it is for the Hank Rhon companies.
Western Union "does not comment on the subpoenas and other requests it receives from law enforcement officials," Pia De Lima, a spokeswoman, said in an e-mailed statement.
This isn't the first time U.S. officials have examined Hank Rhon's business dealings. In 2001, the Federal Reserve fined him and an offshore holding company he owned $40 million for alleged violations of bank-ownership laws and lending violations at Laredo National Bancshares. It was the second-largest fine the Fed had levied to that point. In the settlement, Hank Rhon denied the allegations.