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Tuesday, November 9, 1999 Published at 16:07 GMT

World: Americas

Citibank censured over money laundering

Private banks deal with £9.4 trillion a year - some from crime and corruption

US banking giant Citibank has been criticised at a Senate hearing into money laundering in the American banking system.

A senate-investigative committee said there was no evidence that the bank knowingly helped clients suspected of links to corruption and crime to conceal the true source of funds.

But it accused the bank of failing to implement procedures which would have weeded out money from illegal sources.

Commitee chair Senator Susan Collins, a Maine Republican, said: "Too often, Citibank's private bank essentially paid lip service to its own procedures.

[ image: Salinas: $80-$100m account frozen by Switzerland]
Salinas: $80-$100m account frozen by Switzerland
"Even more troubling, (its officials) continued to do so even in the face of highly critical internal audits and warnings from banking regulators," she said.

The hearing follows the release of a 64-page report from the committee, which has been examining for a year the activities of both Citibank's private banking operation, and private banking in general.

"We cannot allow the integrity of our banking system to be sullied by the dirty money that fuels the engine of criminal enterprises both here and abroad," Senator Collins said.

"Our banks must be vigilant in their efforts to detect and report criminal activity and avoid acting as conduits for money laundering."

The report concluded that Citigroup - formed last year from a merger of Citibank and Travelers Group - moved too slowly to correct known problems.

[ image: Citybank's Reed:
Citybank's Reed: "Change takes time"
Citigroup chairman John Reed, who was also co-chairman of Citibank, admitted at the hearing that controls over Citibank's private banking unit, which deals with clients who have assets of $3m or more, had been unsatisfactory.

He said there had been "oversight lapses" in the early 1990s, but that since then the bank had taken steps to rectify this.

"Of course the changes did not occur overnight, and in retrospect one could take issue with whether they happened fast enough," he said.

Taped Salinas discussions

The report cited in particular four sets of clients, from Mexico, Nigeria, Pakistan and Gabon, whose sources of income were dubious and who passed millions through Citigroup banks.

Raul Salinas, the eldest brother of a former Mexican president, was imprisoned for 50 years in Mexico in January for masterminding the killing of a top ruling-party official.

He secretly transferred $87m out of Mexico from 1992 to 1994 using Citigroup banks.

[ image: Zardari: May have used Citibank to hide $9m in bribes]
Zardari: May have used Citibank to hide $9m in bribes
The report said rumours abounded at the time that Salinas had links to drug traffickers and dubious sources of income, but Citibank executives asked few questions when he made transactions.

And it says that after his arrest in 1995, Citigroup employees were taped discussing whether to move his accounts to Switzerland to make discovery of the assets and bank records more difficult.

The US Justice Department has been carrying out a separate investigation of Citibank's handling of Salinas' money since 1995.

Asif Ali Zardari, the husband of former Pakistani Prime Minister Benazir Bhutto, was another prominent client cited in the report.

Zardari, who was a senator as well as a minister in his wife's government, has been in jail since her government was dismissed by the president for alleged corruption in November 1996.

Zardari is believed to have used some of his Citibank accounts, located in Switzerland, to disguise $9m of payments he received on a gold importing contract.

[ image: Gabon's Bongo: Funds may have come from the treasury]
Gabon's Bongo: Funds may have come from the treasury
Another client cited in the report is the President of Gabon, Omar Bongo.

The report said Citigroup has moved more than $130m through Mr Bongo's accounts since 1985, and some of the funds may have come from Gabon's public treasury.

The sons of Nigeria's late military dictator Sani Abacha, Mohammed and Ibrahim, first opened accounts in 1988 which grew to a total of more than $110m, the report says.

At the Nigerian government's request, a Swiss court has frozen the accounts of Mohammed Abacha - who has been arrested on murder charges - and started a money-laundering investigation.

Government controller 'lax'

The two-day Senate hearing began amid reports that the government agency which oversees nationally chartered banks has been lax in monitoring them for possible money laundering.

The New York Times says a report by the inspector general's office at Treasury, which has not yet been released, criticises the US Office of the Comptroller of the Currency for a lack of independence.

The Bank of New York is currently involved in an investigation into the source of billions of dollars that moved from accounts in Russia to London and New York.

It has been alleged that some of the money was connected to the Russian mafia.

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