CITIBANK CUT CORNERS FOR SALINAS

U.S. report says bank ignored safeguards against money laundering

Eager to do business with Raul Salinas de Gortari, a brother of the former
president of Mexico, Citibank executives ignored some of the bank's own
safeguards against the laundering of illicit funds, a U.S. congressional
report says.

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, Paulina Castanon, to move the money elsewhere,
apparently without the consent of the legal department.

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

The disclosures, in a report by the General Accounting Office, the
investigative arm of Congress, represent the most detailed accounting yet
of how Salinas used a special Citibank unit reserved for the wealthiest
customers to secretly move up to $100 million out of Mexico.

Salinas and the bank have repeatedly denied wrongdoing. Whether any U.S.
laws were broken remains unclear.

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

In a statement Thursday, the bank said the report "contains errors of fact
and interpretation."

Testifying as a government witness in an earlier money-laundering case, the
Citibank executive who worked on Salinas' account, Amy Elliott, suggested
that the bank's "know your customer" policies were fundamental to its
efforts to avoid easing the way for illegal transactions.

Although Elliott stated that she and her colleagues had evaluated their
potential customers carefully, checking their business dealings and credit
backgrounds and visiting them up to 12 times a year, the congressional
investigators found that she worked quite differently with Salinas.

"Citibank made no attempt to investigate Salinas' background before
accepting him" as a customer in 1992, the report states.

It notes that Elliott, still an employee in good standing, filed neither a
standard financial profile nor a financial background check. Nor, as bank
policy required, did she ask to have the requirement for a profile waived.

Although Salinas had never been formally accused of wrongdoing in
connection with Citibank, rumors of possible corruption were widespread in
Mexican financial circles. Nonetheless, Elliott later told prosecutors in a
deposition, she thought of her new customer as something akin to "a
Rockefeller."

Elliott said in her statement that she believed that much of Salinas' money
came from the sale of a construction company. But as the deposits flowed
in, generating $1.1 million in fees, bank officials never learned the
company's name.

Under the system Elliott devised, Castanon, Salinas' wife, would pick up
cashier's checks in pesos at Mexican banks, carry them to the Citibank
subsidiary in Mexico City, convert them to dollars and wire them to New
York, using the name Patricia Rios, a first name that she did not use,
combined with her mother's maiden name.

Congressional investigators, like Swiss detectives before them, were unable
to establish the source of the pesos that Salinas kept in Mexican banks.
But if he had received drug bribes, they would have almost certainly been
paid in American dollars, the currency in which drugs are generally sold.

From Mexico, Salinas' money went to a Citibank account in New York that
disguised its origins by mixing it with deposits from other banks and
customers. The funds were then sent to Swiss and British accounts in the
name of a Cayman Islands shell corporation, Trocca Ltd., that was run by
three other offshore shell companies but secretly controlled by Salinas.

The congressional report states that after Salinas' arrest in February
1995, Elliott filed a brief financial profile and went to Mexico City
without the knowledge or consent of the bank's legal representative to try
to persuade Castanon to close her husband's Citibank accounts.

Castanon finally did try to consolidate the holdings, but was arrested in
Switzerland that November. Only then did Citibank file a criminal referral
form, the congressional report states, but it neglected to mention Trocca
or the Swiss or British accounts.

Checked-by: Joel W. Johnson