Citigroup Inc (NYSE:C)’s Mexican Unit ‘Banamex’ Faces Criminal Probe In Oil Company Fraud Case

by Tom Kelly | Thursday, Apr 3, 2014 | 885 views

Boston, MA, 04/03/2014  (usastockreports) – Citigroup Inc (NYSE:C) is having to face criminal probe for fraud at its Mexico unit, reported the New York Times.

Citi’s unit in Mexico is under investigation by federal authorities regarding a fraud involving as much as $400 million, as reported by the New York Times. The newspaper even cited people who were briefed on the matter.

Fraudulent Loan Case

In February, the bank disclosed that it had found at least $400 million involved in fraudulent loans in Banco Nacional de Mexico, its subsidiary in Mexico, commonly called as Banamex. The bank had also reported probable presence of some employees on the crime. Citi informed that the loans in talks were made to a Mexico based oil services company Oceanografia, a supplier for Mexico’s state owned oil company called Pemex.

Last month, Banamex had seized a ship that was being used as collateral for the loan provided to the Mexican oil company in this case.

Federal Investigation

The New York Times said that the investigation is being overseen by prosecutors from the U.S. attorney’s office in Manhattan and the U.S. Federal Bureau of Investigation. They are probing on finding out if loopholes in the bank’s internal controls have given way to the fraudulent loans case in Mexico. The newspaper also added that the FBI as well as the prosecutors is trying to find out if Citigroup Inc (NYSE:C) was an equal victim as well as enabler in contributing to the fraud.

In February, Reuters had reported that the FBI had knowledge on the matter of losses in loans in Citi’s Mexico’s unit which were caused by a Mexican company. It had been monitoring the state of affairs suspecting to finding out any potential criminal activities. On April 1, Reuters was also informed by two sources having knowledge on the matter, that Banamex had fired two bond traders. Citigroup Inc (NYSE:C) had found out unlawful trading last year.

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