Banamex USA Bank To Pay $140 Million Fine And Shut Down

By Jude Joffe-Block
Published: Thursday, July 23, 2015 - 6:36pm

Banamex USA bank, a subsidiary of Citigroup, must pay regulators a $140 million fine for its failure to adequately follow federal anti-money laundering regulations. Citigroup announced Wednesday Banamex USA’s remaining branches will close.

The threat that organized crime, including Mexican drug cartels, will launder money through banks is a concern along the Southwest border.

The Federal Deposit Insurance Corporation and the California Department of Business Oversight determined Banamex USA wasn’t doing enough to follow federal regulations to prevent financial crimes.

“The reason that federal law has such stringent rules is to make sure banks take adequate steps to make sure they are not unwittingly facilitating illegal activities,” said Tom Dresslar, a spokesman for the California Department of Business Oversight.

“Banamex, going back to 2012, has fallen short in complying with those requirements and so we came to a settlement," Dresslar said.

The $140 million fine Banamex USA must pay represents almost a sixth of the value of the banks’ total assets. A Citigroup press release said Banamex USA has assets of just over $850 million and a deposit base of about $460 million.

Geoffrey Sant, who teaches banking litigation as an adjunct professor at Fordham Law School, believes the penalty is too harsh and counter-productive.

“It’s incredible. You can see exactly why banks are pulling out of the Mexican border region,” Sant said.

In recent years, some national banks have closed branches in Arizona border towns, or have shut down certain bank accounts associated with cross-border business. The banks have cited anti-money laundering regulations and the risk of incurring penalties as a factor behind these decisions.

“I have a hard time comprehending why the regulators are doing this,” Sant said of the regulators’ decision to crack down on Banamex USA. “It is really harmful to the communities, and it is also not helpful at all toward the fight against financial crimes and anti-money laundering.”

Sant said when major banks leave, people are forced to use cash.

“If you force mainstream banks to move out of the region, that doesn’t make financial crimes disappear,” Sant said. “It makes it harder to catch them.”

The FDIC came to Nogales, Ariz. last month to talk with the local business community about the problem of banks leaving the border, but there haven’t been any policy changes to date.

Banamex USA is an affiliate of the Mexican bank, Banamex. Citigroup acquired Banamex in 2001.

Banamex USA used to have 11 branches in the Southwest, including one in Nogales. Citigroup’s press release said it would end Banamex USA’s banking operations and would close remaining branches in Houston, San Antonio and Los Angeles in the coming months.

The release said Banamex USA, “has not been able to operate to the scale necessary to generate consistent quality earnings.”