The government has agreed not to prosecute Citigroup’s Mexico-based subsidiary despite damning evidence it aided a cross-border money-laundering scheme for years, the Department of Justice announced Tuesday. The non-prosecution agreement is in sharp contrast with the hard line that Attorney General Jeff Sessions has already laid out for blue-collar criminals.
Under the non-prosecution agreement, Citigroup-owned Banamex USA will pay $97.4 million and admit it broke the Bank Secrecy Act for years.
Banamex and Citi officials knew of some 18,000 separate suspicious account activities from 2007 to 2012 yet reported just six to regulators, according to the description of the crimes in the deal. The transactions mostly involved remittance payments from people in the United States to account holders in Mexico — a standard class of transaction relied upon heavily by immigrants.
The transactions Citigroup failed to police internally or report to external authorities, however, were not typical worker remittances. Those usually involve small sums and scattered movements of money — as one would expect to see when a large group of individual workers are sending some of their pay back home to a large number of families.
Citigroup’s subsidiary noticed that very large remittances were flowing into the same bank account — as one might expect to see if illicit, scattered profits earned in the United States were being consolidated across the border by the person or organization who had made them possible.
Bankers were well aware of more than a billion dollars in suspicious remittances but did almost nothing to draw law enforcement attention to the transactions, on which the bank itself was of course earning profit.
Citigroup, which took control of Banamex some years prior to the bank’s criminal failings on money laundering oversight, plans to close the subsidiary down for good later this summer. But Citi itself was not required to plead guilty to a crime.
Corporate crime enforcement watchdogs immediately hammered the Trump administration.
“Again, a crime and no crooks,” Bart Naylor of Public Citizen told the Corporate Crime Reporter. The deal sparks fears of “a kid-gloves approach towards corporate crime in the new administration,” Too Big To Jail author Brandon Garrett told the paper. Roughly eight times out of nine that the government builds up a Bank Secrecy Act case, Garrett said, it chooses to resolve it through sterner means than the non-prosecution deal Citigroup struck this week.
Same old song, but with a different feeling
A sweetheart deal for a megabank is hardly new. The Obama administration was notoriously soft on white-collar crime for the first three-quarters of its tenure, before making some high-profile but low-impact pushes to hold banking companies publicly accountable. Overall enforcement of white-collar criminal law has been on a downward trend for decades.
But this is the second time in as many years that Citigroup has acknowledged involvement in criminal activity. In the previous example, it had no subsidiary onto which it could dump blame. It pleaded guilty in 2015, along with several other banking giants, to rigging markets for foreign currencies.
Such repeat offending would be grounds for severe punishment enhancements in other criminal contexts, under Sessions’ own recent policy directive instructing federal prosecutors to seek the maximum possible prison terms even in low-level drug crime cases.
Sessions’ memo reversed former Attorney General Eric Holder’s guidance that prosecutors should use their own discretion to determine whether to throw the book at crooks or temper their sentencing recommendations to match the specific circumstances of a case. By returning some discretion to prosecutors to ease up on people they don’t view as menaces to society, Holder made some material progress for the long-ascendant idea that America’s tough-on-crime politics of the past have created more problems than they’ve solved.
Sessions rejects that view. He and his boss operate straight out of the 1990s hardliner playbook that birthed racist mandatory minimums for crack cocaine and Orwellian sentence-enhancement powers that routinely drop life sentences on minor criminals. They are philosophically devoted to the policy approach that helped turn America into the most incarcerated country in the world.
The lax enforcement of white-collar criminal law under Obama was nauseating for many progressives, especially since it followed the most ruinous Wall Street swindle in 70 years. Agencies continued to act as though the rules that apply on Main Street can be bent or ignored for Wall Street.
But at least Obama’s laxity toward financial institutions was paired with slow-but-persistent efforts to redeem the blue-collar channel of the American justice system: Restoring educational opportunities for the incarcerated, revisiting sentencing policy, and reviving the idea that police and prosecutors must not be so zealous in their pursuit of public safety as to deprive Americans of their constitutional rights.
Under Trump, the watchword on crime is supposed to be zero tolerance.
But it seems that’s not true if you wear a suit everyday — even, oddly enough, if your alleged crimes involve suspicious flows of cash across the border Trump has promised to wall off.