Citi was money launderers’ favourite bank, US law enforcement officials say

Senior US law enforcement officials have alleged that drug traffickers prefer to launder money through Citigroup due to the belief that it has less robust fraud controls, says the Financial Times

Last week US prosecutors detailed how two Californians allegedly working for the Sinaloa cartel deposited tens of thousands of dollars at Citi ATMS/.

On at least three incidents in January 2021, the allegedly fed almost $36,000 in elicit cashinto various ATMs, a few hundred dollars at a time, and waited a minute or two between transactions.

By splitting the sum into dozens of smaller deposits, prosecutors claim, they stayed below the $10,000 threshold at which banks are required to report cash transactions to the US Treasury.

Drug Enforcement Administration officials told the Financial Times that the duo, alleged to be part of a vast criminal network that cleaned at least $50mn in fentanyl and meth proceeds in the US, scoped out several banks before choosing Citi.

One senior official said: "There are banks that pay less attention than others."

A second senior DEA official said: "I will name one [bank]. There were two instances where in this investigation we had money couriers making 24 back-to-back deposits totalling $16,000 to a Citibank ATM . . . There were 15 back-to-back deposits totalling $20,000 also to a Citibank ATM . . . They figure out the places that are more favourable to them."

While there were no reporting requirements for the individual transactions, the pattern of the deposits should have aroused suspicion, the DEA official said.

The two men — Guillermo Zambrano and Luis Belandria-Contreras — "were definitely trying to keep [the deposits] below the threshold so as not to send up any red flags, but I would imagine that 24 back-to-back deposits by the same person, totalling $16,000 would set off some type of an alert", the senior official added.

A lawyer for Belandria-Contreras did not respond to a request for comment. A lawyer for Zambrano, John Targowski, said his client engaged in the alleged acts only because he was in debt and threatened with kidnapping by a cartel member, and that he intended to "pursue a duress defence". Both have pleaded not guilty.

Citi declined to comment on the specific case, citing secrecy requirements around transaction reporting. The bank said it had "robust anti-money laundering policies", adding: "When we find evidence of such activity, we notify the authorities as required and fully cooperate with any investigation through appropriate legal processes."

The indictment also details how another defendant, Jiayong Yu, allegedly deposited a cashier's cheque at a JPMorgan Chase ATM, and "approximately $100,000 of United States currency at a Chase Bank teller window" last year. There was no suggestion that Chase failed to flag the transaction. Chase declined to comment. Yu has pleaded not guilty to related charges. His lawyer did not respond to a request for comment.

Law enforcement officials have for years warned that Mexican drug traffickers and Chinese accomplices have become ever more adept at laundering cash via the legitimate banking system.

"We're seeing a huge uptick in money, cash being deposited in banks and then wired wherever," the first senior DEA official said. They added that tens of thousands of dollars were being sent back to China each month via money transfer institutions in Flushing, New York.

In 2012, the Department of Justice fined HSBC $1.9bn for failing to prevent money laundering by cartels in Mexico, after an investigation found that hundreds of thousands of dollars were being deposited with the bank each day through teller windows at HSBC Mexico branches.

Prosecutors said drug traffickers even "designed specially shaped boxes that fit the precise dimensions of the teller windows".

Money-laundering schemes have since become much more sophisticated, through a mutually beneficial arrangement with Chinese nationals in the US who use encrypted apps, cryptocurrency and mirror transactions in underground Chinese banks to hide their tracks.

"The cartels are desperate to get cash made from the sale of drugs in the United States back down to Mexico," said Martin Estrada, the US attorney for the Central District of California, last month.

"The Chinese money-laundering groups, on the other hand, are in the business of helping wealthy Chinese nationals obtain cash in this country and thereby circumvent export controls in China on the movement of cash." Thanks to the explosion in fentanyl trafficking, this results in "virtually limitless supplies of cash", Estrada added.

Tracking such transactions has been difficult for law enforcement. "The growth and the expansion of this," the first senior DEA official said, "has gone past what law enforcement track and monitor".