REPORT: CITIBANK MOVED ALLEGED MEXICAN DRUG CASH

Washington - Citibank transferred as much as $100 million in alleged
drug money for the brother of a former Mexican president without
checking the source of the funds, according to a congressional report
being released today.

The report by the General Accounting Office, the investigative arm of
Congress, criticized the nation's second-largest bank for failing to
follow its own procedures against money laundering by not looking into
the financial background and source of the funds.

Citibank "facilitated a money-managing system that disguised the
origin, destination, and beneficial owner of the funds," according to
the report, obtained by The Washington Post, The New York Times and
The Wall Street Journal.

The report, "Raul Salinas, Citibank and Alleged Money Laundering,"
could prompt congressional hearings on Citibank next year, officials
told the Post. It could also lead the Justice Department, which has
been investigating Citibank's handling of Raul Salinas' money for
three years, to speed up its probe into whether the bank broke any
criminal laws.

Raul Salinas is the eldest brother of Carlos Salinas de Gortari, the
Harvard-trained economist who was once the darling of U.S. business
and political leaders when he held the Mexican presidency from 1988 to
1994. But there were repeated rumors that Raul Salinas, known for
living lavishly on a $190,000 civil service salary, had dubious
sources of income and was linked to drug lords.

Yet when Raul Salinas came to Citibank's private banking unit in 1992,
few questions were asked, the report said.

From 1992 to 1994, Salinas' wife Paulina hand-carried checks to
Citibank Mexico, allowing Citibank to funnel millions of dollars from
Mexico to Switzerland through a complex series of transactions through
New York, the Cayman Islands and London that hid the paper trail of
the funds.

As the bankers took in millions of dollars from Salinas, they never
asked for standard information on his financial background and made
virtually no effort to verify the source of the money, the report said.

After Salinas was arrested for murder in 1995 and lawyers for the bank
had begun monitoring his accounts, his personal banker in New York
quietly advised Salinas' wife to move the money elsewhere, apparently
without the consent of the legal department.

And even when Citibank finally warned federal officials about Salinas'
suspicious transactions, and after Mrs. Salinas had been arrested as
well, the bank failed to tell the government about the network of
foreign shell companies and offshore accounts the bank had set up to
shield the Salinas fortune, the report said.

Whether any U.S. laws were broken remains unclear. Federal prosecutors
in Manhattan are continuing to investigate the possibility Citibank, a
unit of Citigroup Inc., illegally laundered the money. Officials at
the Justice Department and the Federal Reserve Bank refused to discuss
the case with congressional investigators.

Money laundering is concealing the source of funds obtained from an
illegal activity, such as drug sales or bribery, government and
banking industry lawyers said.

To prove criminal wrongdoing, prosecutors would have to show that an
institution was "willfully blind" to the fact funds come from an
illegal source, lawyers said. Being "willfully blind" is "the
conscious avoidance of knowledge of facts," the GAO report said. If a
bank willfully ignores its own policy, it makes "willful blindness"
easier for a prosecutor to prove, lawyers said.

The report was issued weeks after Swiss authorities had moved to
confiscate $114 million from Salinas, asserting the funds were
protection money paid by drug traffickers. Mexican officials also
recently announced they had frozen an additional $119 million in a
maze of other accounts Salinas controlled.

According to a Citibank representative, "Citibank New York's Mexican
Division believed all of Mr. Salinas' funds had been obtained legally,
with a large portion resulting from the sale of a construction company
he owned," the report said. "However, Citibank reportedly knew no
details about the construction company, including its name, who had
purchased it, or the amount of money generated by the sale."

A Citibank spokesman said the GAO report "contains errors of fact and
interpretation" but said the bank would cooperate fully with law
enforcement authorities.

Salinas was arrested in 1995 on charges of masterminding the killing
of a top ruling-party official. He is still in prison.

Checked-by: Patrick Henry