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Categorized | Banks

Mexico issues more Banamex arrest warrants

Posted on May 31, 2014

A customer exits a Citigroup Inc. Banamex bank branch in Mexico City, Mexico, on Monday, March 28, 2011. The pension fund at Citigroup Inc.'s Banamex unit is selling peso debt with maturities between three and four years and shifting money into stocks on concerns inflation will rise. Photographer: Gustavo Graf/Bloomberg©Bloomberg

Mexico has issued more arrest warrants – including an unspecified number for staff at Citigroup’s Banamex unit – a day after detaining the owner of the oil services company at the centre of the $400m alleged fraud scandal that has rocked the bank since it came to light three months ago.

“Yes, there are more arrest warrants, but there are no further detentions yet, we are trying to execute the orders,” Jesús Murillo Karam, Mexico’s attorney-general, told reporters.

    Citi, which has purged a dozen staff at Banamex after a two-month investigation, and has admitted it failed to spot a plethora of warning signs in the alleged factoring fraud, has already fired 12 staff at its formerly star unit over the scandal. Four of those dismissed were senior managers in Mexico and the bank had been bracing for criminal investigations into some staff, according to a person familiar with the investigation close to the investigation.

    Citi had also said it expected to have to sanction other staff – probably in the form of docked pay and bonuses – before the affair could be laid to rest.

    Asked if the arrest warrants included Banamex staff, Mr Murillo Karam said: “Yes there are, but I am not going to say who.”

    A Banamex spokesman could not immediately be reached for comment.

    Mr Murillo Karam said “one of the main people responsible” had been detained.

    The scandal erupted in February when Citi announced a $235m hit to 2013 profits caused by an alleged fraud at its accounts receivables business in Mexico. The bank then took a further $165m charge in the first quarter.

    Citi’s chief financial officer John Gerspach told a conference on Tuesday: “We’re still hopeful of some level of recovery, but we’re not counting on that as yet.”

    Banamex had been a strong performer in the global group but the bank has been forced to admit, in the words of Michael Corbat, Citi CEO, that there were “tell tales along the way that people should have escalated, and they didn’t”.

    Amado Yáñez, the chief executive and main owner of Oceanografía, the Mexican oil services company was arrested on suspicion of complicity in the $400m fraud earlier this week.