April 05, 2012

Citigroup, one of the world's biggest banks, had major lapses in its anti-money laundering systems that are supposed to police the flow of shadowy money, a U.S. bank regulator said.

The Comptroller of the Currency, which regulates national banks, said on Thursday that Citigroup Inc's Citibank had fallen short in establishing and maintaining programs meant to identify money laundering and other improper flows of money.

Under an agreement with the OCC, the bank will have to improve its anti-money laundering operations but will not pay a monetary penalty. Citi did not admit or deny any wrongdoing.

There has been an increased effort by federal and state regulators to crack down on shadowy money moving entering the U.S. banking system. Citigroup is the fourth big global bank to be hit in the regulatory crackdown over the past two years.

The OCC specifically cited a weakness in Citigroup's so-called remote deposit capture business. That business typically enables banks to process deposits from foreign banks seeking access to the U.S. banking system.

Those deposits can be transferred into a bank via large volumes of traveler's checks.

Citi informed the OCC that it had found compliance problems in this line of business dating back to 2006, according to the consent order released on Thursday.

As part of the agreement with the OCC, Citi will have to hire an independent consultant to review bank records and determine whether "suspicious activity was timely identified by the bank."

"Many of the issues highlighted in the OCC's order have already been remediated or are in the process of being remediated," the bank said in a statement. "Furthermore, we are developing a plan to address the remaining OCC requirements."

The order also cites problems in Citigroup's correspondent banking business.

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