Efforts by Citigroup senior executives to tighten controls in Mexico were rebuffed by managers there for at least five years before the U.S. bank found the local unit had suffered a $400m loan fraud last month, four people with direct knowledge of the matter said.
Bloomberg reports that employees at Grupo Financiero Banamex SA process some documents by hand instead of using modern information systems that make it easier to detect flawed loans, said another person. The people, who include current and former U.S. executives of Citigroup, requested anonymity because the matter isn’t public.
Banamex snubbed efforts to integrate systems with its parent and was slow to improve controls, technology and corporate governance, the four people said. The failures to act on requests from headquarters date from at least 2008 and created an atmosphere that may have allowed fraud to occur, one person said.
'We dispute assertions by anonymous sources peddling theories that the management team is somehow unaccountable or autonomous', Mark Costiglio, a Citigroup spokesman, said in an e-mailed statement, referring to the team in Mexico. 'While Banamex is a subsidiary of Citi, it is absolutely subject to the same risk, control, anti-money laundering and technology standards and oversight which are required throughout the company'.
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