NEW YORK -- A U.S. Justice Department criminal investigation into money-laundering controls at Citigroup's Banamex USA unit has uncovered potential violations serious enough to merit a fine under the Bank Secrecy Act, according to people familiar with the probe.
Prosecutors are looking, in part, at emails from lower-level employees at the unit who raised concerns about lax anti- money-laundering practices, said two people who asked not to be identified because the matter is confidential. Among issues raised in the emails: employees' concerns that they didn't know enough about the recipients of large cash transfers; requests for more resources for compliance staff; and complaints, spanning years, that managers weren't being responsive.
The investigation into money-laundering controls at Banamex USA, conducted by the U.S. Attorney's Office in Massachusetts, isn't expected to be finished until next year, the people said.
The biggest fine yet from a probe into secrecy-act violations came last year, when JPMorgan Chase paid $2.6 billion to the Justice Department and other regulators for failing to halt Bernard Madoff's Ponzi scheme. In the Banamex USA matter, possible fines haven't been discussed because settlement talks haven't begun, the people said.
Molly Millerwise Meiners, a Citigroup spokeswoman, referred to the company's disclosure of the investigation, which said the bank is cooperating fully with the government. Peter Carr, a spokesman for the Justice Department, declined to comment.
Citigroup set aside $2.9 billion in the fourth quarter to cover possible fines resulting from investigations into money laundering as well as allegations of rigging currency and interest-rate benchmarks and other small matters, according to company presentations.
Citigroup said in May that the Justice Department declined to prosecute it in the interest-rate case. Last month, its Citicorp banking unit en
tered a guilty plea and agreed to pay a $925 million fine for rigging foreign-exchange markets. It also paid $394 million to settle private foreign-exchange claims.
Prosecutors' focus on the emails stems from ongoing scrutiny of anti-money-laundering controls at Citigroup by both state and federal regulators. The investigation presents the latest obstacle to Chief Executive Officer Michael Corbat's self-professed drive to turn Citigroup into a "boring" bank.
Some of the greatest regulatory scrutiny has fallen on Banamex USA, a California-based unit which helps customers move money between the United States and Mexico. It had three branches and $1.1 billion in assets at the end of March, according to a regulatory filing.
The Justice Department's secrecy-act probe began when prosecutors looking into the laundering of drug money began coming across accounts there, the people said. Citigroup disclosed last year it had received grand jury subpoenas related to anti-money-laundering requirements at Banamex USA, which is affiliated with its Mexican operations.
Citigroup wants to shut the unit, according to a person familiar with the situation. Such a process could take at least a year, during which customer accounts could be closed or moved and investigations could be completed, said one of the people familiar with the situation.
Citigroup has been the subject of government money- laundering investigations before. Its private bank in Japan was shut down by regulators there over breaches in money-laundering controls.
Citigroup's main deposit-taking subsidiary, Citibank NA, is under an April 2012 consent decree with the Treasury Department's Office of the Comptroller of the Currency for being slow to file suspicious activity reports. The next year, the Federal Reserve filed a consent order to force the bank to improve money-laundering controls.
The Bank Secrecy Act of 1970 was passed in an effort to stop organized crime from laundering funds through secret foreign accounts. It requires U.S. banks to keep records of transactions of more than $10,000 and to report suspicious activities that might be linked to money laundering, tax evasion or other crimes.