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Citigroup is having a bad time in Mexico

These missteps have led to millions in losses and several federal investigations.

Banamex branch mexico Enlarge
A Banamex branch in Mexico City on Nov. 23, 2009. (OMAR TORRES/AFP/Getty Images)

Citigroup is not having a good time in Mexico.

The third largest US bank by assets is facing multiple investigations over transactions involving its Mexican subsidiary, Banco Nacional de Mexico, known as Banamex, which it acquired in 2001.

Citigroup's Mexican woes may be part of the reason the US Federal Reserve last week rejected its plans to increase its dividend and buy back shares. The US Federal Government may be opening an investigation into the bank's dealings in Mexico.

Here's a look at some of the bank's more serious missteps of late: 

 

1. Rogue traders

A broker works the Mexican Stock Exchange. (AFP/Getty Images)

Banamex, Mexico's second largest lender, sacked two bond traders after discovering unauthorized trading last year that may have cost the bank tens of millions of dollars in paper losses — meaning they haven't been realized yet.

A spokeswoman for Citigroup said the rogue traders had been dismissed for breaching the bank’s “code of conduct.”

The trades were uncovered by an internal review.

 

2. Fraud

A Banamex employee processes a transaction at a branch in Mexico City on July 19, 2001. (AFP)

Citigroup said in late February that it had discovered at least $400 million in fraudulent loans at Banamex, forcing it to cut its 2013 profit by $235 million.

The loans were made to Mexican oil services company Oceanografia, which provides construction, maintenance and vessel chartering services to Mexican state-owned oil giant Pemex.

Banamex was supposed to recoup the money as Oceanografia received payments from Pemex.

But a Citigroup investigation revealed the loans were backed by bogus invoices. The US bank said some of its employees may have been involved in the fraud. 

“There will be accountability for those who perpetrated this despicable crime and any employee who enabled it,” Citigroup Chief Executive Michael Corbat wrote in a Feb. 28 memo to staff.

The Mexican government along with the US Federal Bureau of Investigation and Securities and Exchange Commission are now apparently investigating the transactions

 

3. Money laundering 

Newly printed Mexican 500 peso bills are displayed at Banco de Mexico in Mexico City on Aug. 30, 2010. (Alfredo Estrella/AFP)

Citigroup said last month US authorities were investigating the bank and the US unit of Banamex for money laundering. 

Citigroup said the US Attorney’s Office for the District of Massachusetts and the US Federal Deposit Insurance Corp had filed subpoenas against the bank and Banamex.

The federal grand-jury subpoenas were issued after Citigroup discovered the $400 million fraud at Banamex, but it's not clear if the two events are linked.

 

4. Bad loans 

This photo taken on Jan. 13, 2014, shows bullet holes in the window of a Banamex branch in Apatzingan, a town in the western Mexican state of Michoacan. (AFP)

Citigroup also warned last year that there were problems with about $300 million worth of loans to Mexican homebuilders and that the bank stood to lose as much as $85 million.

That's a drop in the ocean compared with the bank's earnings of $13.9 billion for 2013 and the tens of billions of dollars the firm lost in the 2008 financial crisis, but it raises more concerns about Citigroup's exposure in Mexico and emerging markets in general. 

 

http://www.globalpost.com/dispatch/news/regions/americas/mexico/140401/citigroup-fraud-mexico-investigation-bad-time