JPM JP Morgan Chase and Co

By Emily Glazer and Telis Demos 

Citigroup Inc. has agreed to pay less than $100 million to settle a yearslong money laundering investigation, the bank and government agencies announced Monday.

The bank reached a settlement with the Justice Department and U.S. attorney's office in Boston for $97.44 million, with no sanctions against Citigroup and a so-called nonprosecution agreement, according to the bank and Justice Department. The investigation centered on activity in the bank's Banamex USA unit.

As part of the agreement, Citigroup admitted that Banamex USA violated the Bank Secrecy Act from at least 2007 until at least 2012.

The agreement is far less than previous money laundering settlements with large banks and is one of the first to emerge since the change in presidential administrations. Other deals with big banks have often topped $1 billion and involved so-called deferred prosecution agreements or criminal guilty pleas.

In 2012, HSBC settled for about $1.9 billion; in 2014 J.P. Morgan Chase & Co. settled for about $2 billion and BNP Paribas settled for nearly $9 billion; and in 2015 Commerzbank settled for about $1.5 billion.

Citigroup's settlement is just the second nonprosecution agreement, known as an NPA, for a big bank in the last eight years. The other arose from J.P. Morgan's settlement last year over hiring sons and daughters of Asian government officials, known as princelings.

Citigroup said in a statement that it was "pleased to resolve these matters." The bank said it would be finished with winding down Banamex USA by June 30. "Among our most serious obligations as a bank is to achieve the strongest possible system for anti-money-laundering and sanctions compliance to protect the integrity of the financial system," the bank added.

While Citigroup's settlement was far smaller than those of its peers, it isn't clear to investors if this will result in a gain that could be reflected in upcoming earnings. While banks often say in quarterly releases if they increased or decreased their litigations reserves, the absolute level of those reserves isn't disclosed.

Citigroup had litigation expenses of $1.1 billion in 2016, according to bank regulatory filings.

Banamex USA was a California-based bank owned by Citigroup that operated a handful of branches along the U.S.-Mexican border. Citigroup announced in 2015 that it would shut down Banamex USA and began closing branches. That same year the Federal Deposit Insurance Corp. and California Department of Business Oversight fined Banamex USA $140 million for lax monitoring of potentially illicit transactions being conducted through cross-border remittances.

The unit was previously part of the much larger Mexico-based Banamex group that Citigroup acquired in 2001. This is now known as Citibanamex.

From 2007 to 2012, Banamex USA processed over 30 million remittance transactions to Mexico with a total value of more than $8.8 billion, but there was virtually no investigation for suspicious activity, according to a statement of facts related to the settlement. Over that time period, the banking unit filed just nine suspicious activity reports, even though its own monitoring reports identified over 18,000 alerts on more than $142 million in potentially suspicious transactions, the statement said.

In March 2017, the FDIC announced regulatory resolutions with four former Banamex USA executives related to Bank Secrecy Act violations. Those prohibited some individuals from participation in the conduct of a financial institution and included monetary penalties ranging from $30,000 to $90,000.

Citigroup's last major settlement with the Justice Department was for $925 million in 2015, alongside several other banks, related to alleged manipulation of the foreign exchange market. In 2014 Citigroup paid $7 billion to the Justice Department and other agencies to settle allegations that it knowingly sold shoddy mortgages to investors.

Write to Emily Glazer at emily.glazer@wsj.com and Telis Demos at telis.demos@wsj.com

(END) Dow Jones Newswires

May 22, 2017 11:56 ET (15:56 GMT)

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