Mexico’s banking regulator has slapped a nearly 30 million peso ($2.2 million) fine on the Citigroup subsidiary Banamex, for failing to provide sufficient accounting controls. The regulator said the lack of oversight allowed the Mexican firm Oceanografia to allegedly dupe the bank out of $400 million.
Banamex had lent the money to Oceanografia, an oil services firm contracted by the state petroleum monopoly, PEMEX, based on invoices that turned out to be fake.
Oceanografia has not been charged with any wrongdoing but is under investigation. The company’s CEO and controlling shareholder, Amado Yanez Osuna, had been under house arrest for nearly two months. He faces bank fraud charges in Mexico but was released earlier this summer after posting $6.2 million bond.
Citigroup fired 12 Banamex employees after discovering the alleged fraud, which also led to the resignation of several high-level employees, including Chief Executive Javier Arrigunaga, according to The Wall Street Journal.
But the Mexican newspaper Reforma points out that the fine represents less than half a percent of Banamex’s earnings during the first half of this year.
For its part, Banamex says it has paid the fine and has reinforced its internal accounting controls.
However, earlier this week Citigroup announced it had discovered a $15 million fraud. According to Reuters, the money was used by a bank-operated security company originally set up to protect Banamex board members from personal attacks, including kidnapping. But Citigroup said the security company also used the funds to offer protection services to some of Mexico’s wealthiest families.
Banamex’s troubles don’t seem to be limited to Mexico. Reuters also reports that a source says “Banamex USA is facing a U.S. criminal investigation involving possible violations of money-laundering laws.”