Citigroup (C) Probed by DOJ Over $400M Fraud Involving Banamex: Report

According to a story posted Friday by The Wall Street Journal, which cites people familiar with the matter, the U.S. Justice Department is investigating Citigroup (C)’s internal controls and whether the bank’s unit in California neglected to alert the government about suspicious banking transactions along the U.S.-Mexico border.

The report also states that U.S. prosecutors want to know why the New York-based bank ignored warning signs and did not submit so-called “suspicious-activity reports” — which are reports made by financial institution to the U.S. Financial Crimes Enforcement Network – an agency of the Treasury Department — flagging the questionable transactions that in some cases involved suspected drug-cartel members.

Last week it was reported that Federal authorities had opened a criminal investigation into fraudulent loans involving Citigroup’s Mexican unit, Banco Nacional de Mexico, known as Banamex.

Citigroup disclosed in February it had discovered a $400 million fraud in its Mexico subsidiary, and said employees may have been in on the crime.

At last check, shares of Citi were falling 51 cents, or 1.6%, to $45.71.

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