Citigroup Inc (NYSE:C) Discovers Fraud in Mexico Unit

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Dallas, Texas 03/06/2014 (FINANCIALSTRENDS) – Citigroup Inc (NYSE:C) reported a huge fraud in their Mexico branch know as Banamex. The branch had provided bogus loans to Mexican oil services company Oceanografia (OSA). According to the reports the bank had extended about $585 million in short-term credit to OSA. As per the repayment plan, the amounts were supposed to be paid back through a financial program. Citigroup is looking into the role of Banamex employees to confirm if they were part of this fraudulent activity.

Citigroup Inc (NYSE:C) Potential Loss After The Fraud

The company during the investigation Citigroup discovered only $185 million could be verified from OSA thus confirming a potential loss of $400 million. The bank is contemplating to check if there is an additional loss of $33 million for outstanding loans directly made to OSA. After the fraud discovery, Citigroup’s 2013 profit fell by $235 million to $13.67 billion after the write-down and the bank shares were down by 0.1% at $48.63.

Moody Against Raising Citigroup Credit Rating

With the disclosure of fraud in Mexican branch, the company’s rating, Moody’s Investors Service, a credit rating agency has deciding against elevating the company’s rating. According to Moody, the company’s net income was reduced by 19% impacting the company’s finance. Earlier, with some of the Banamex’s credit trends with positive sign impelled Moody to review an upgrade.

US Fedaral Jury to Probe Into Citigroup Transaction

According to the latest reports, the federal grand jury is inquiring into Citigroup’s compliance with the U.S. Bank Secrecy Act and regulations on money laundering,

The probe will comprise subpoenas from the U.S. Attorney’s Office for the District of Massachusetts. Also, the report states Mexico’s banking regulator will probe into irregularities reported in the Banamex branch and obtain some details in next 3 weeks.

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