CITIBANK ROLE CRITICIZED IN MEXICAN MONEY CASE

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 safeguards against the laundering of illicit funds, a
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 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 the wife also had been arrested, 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 move up to $100 million out of Mexico secretly.

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

Federal prosecutors in New York are continuing to investigate the
possibility that 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.

The investigation underscores why federal regulators are stepping up
scrutiny of the high-end services called private banking and why they
have begun to propose steps for banks to track customers' financial
movements and backgrounds more closely.

"We determined in the Salinas scenario that Citibank's voluntary
controls did not work," the investigators wrote. "Citibank, while
violating only one aspect of its then policies, facilitated a
money-managing system that disguised the origin, destination and
beneficial owner of the funds involved."

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."

A spokesman for the bank, Richard Howe, would neither detail the
errors nor address any specific issues in the case.

The report also noted that officials in the Office of the Comptroller
of the Currency, which has not investigated the case, believed that
the civil bank-secrecy statute had probably not been violated. The law
says prosecutors can only prove that Salinas or the bank violated
money-laundering statutes if they first show that the money was from
an unlawful source. The prosecutors would then have to demonstrate
that the bank knew or should have known that the money was illicit.

Law-enforcement officials familiar with the case said their principal
challenge had been to amass enough evidence to prove in a criminal
trial that Salinas had earned his money by one of the handful of
crimes, such as drug trafficking, that are covered abroad under the
federal money-laundering statutes.

Swiss investigators, who faced a much lower evidentiary threshold to
confiscate Salinas' deposits there, based their case in part on
statements by convicted drug traffickers imprisoned in the United
States. Although U.S. officials have dismissed some of those potential
witnesses as unreliable, they said others were considered credible.

Checked-by: Patrick Henry