GAO

United States General Accounting Office

Testimony

Before the Permanent Subcommittee on Investigations, 

Committee on Governmental Affairs, U.S. Senate

Not to Be Released

Before 10:00 a.m. EST

Tuesday

November 9, 1999

PRIVATE BANKING

Raul Salinas, Citibank, and 

Alleged Money Laundering

Statement for the Record of Robert H. Hast

Acting Assistant Comptroller General for Investigations

Office of Special Investigations

GAO/T-OSI-00-3

Page 1 GAO/T-OSI-00-3

Madam Chairman and Members of the Subcommittee:

This statement provides the Subcommittee a synopsis of our 

1998 investigation1

 of alleged illegalities involving Raul Salinas de Gotari, 

brother of the former President of Mexico, Carlos Salinas de Gotari, and a 

U.S. bank, Citibank. We conducted the investigation at the request of your 

Subcommittee’s then Ranking Minority Member, the Honorable John 

Glenn. Mr. Salinas had allegedly been involved in laundering money out of 

Mexico, through Citibank, to accounts in Citibank affiliates in Switzerland 

and the United Kingdom.

Results in Brief Mr. Salinas was able to transfer $90 million to $100 million between

1992 and 1994 by using a private banking relationship formed by Citibank 

New York in 1992. The funds were transferred through Citibank Mexico and 

Citibank New York to private banking investment accounts in Citibank 

London and Citibank Switzerland.

Beginning in mid-1992, Citibank actions assisted Mr. Salinas with these 

transfers and effectively disguised the funds’ source and destination, thus 

breaking the funds’ paper trail. Citibank

• set up an offshore private investment company named Trocca, to hold 

Mr. Salinas’s assets, through Cititrust (Cayman)2

 and investment 

accounts in Citibank London and Citibank Switzerland;

• waived bank references for Mr. Salinas and did not prepare a financial 

profile on him or request a waiver for the profile, as required by then 

Citibank know your customer policy; 

• facilitated Mrs. Salinas’s use of another name to initiate fund transfers in 

Mexico; and

• had funds wired from Citibank Mexico to a Citibank New York 

concentration account—a business account that commingles funds 

from various sources—before forwarding them to Trocca’s offshore 

Citibank investment accounts.

1

 See Private Banking: Raul Salinas, Citibank, and Alleged Money Laundering

(GAO/OSI-99-1, Oct. 30, 1998).

2

 Cititrust (Cayman) was an affiliate of Citicorp, located in the Cayman Islands. Citicorp is 

now known as Citigroup, Inc.
Page 2 GAO/T-OSI-00-3

No U.S. documentation identified Mr. Salinas as Trocca’s beneficial owner3

or connected Mr. Salinas to the Trocca funds transferred through Citibank 

Mexico and Citibank New York.

According to Citibank New York’s Vice President (VP) for Legal Affairs, 

whom Citibank designated as its representative to us, Citibank’s actions 

violated only one aspect of the then Citibank know your customer policy: 

Citibank should have prepared a financial profile (i.e., a financial 

background check detailing the source of Mr. Salinas’s funds) or waived the 

requirement before accepting Mr. Salinas as a customer. By investigating 

his financial background, Citibank could have verified the source of 

Mr. Salinas’s wealth and transferred funds.

Limited by the ongoing Department of Justice investigation, we could not 

determine whether Citibank’s actions violated law or regulation. (We 

determined that the case is still pending in the Southern District of New 

York.) The Federal Reserve also did not comment on whether Citibank’s 

actions were violations because information available to it at the time we 

inquired was insufficient for it to make a determination. However, on the 

basis of the details we presented, the Office of the Comptroller of Currency 

(OCC) stated that the actions did not violate civil aspects of the Bank 

Secrecy Act.4

 Further, private banking’s know your customer policies were 

then voluntary and not governed by law or regulation.

A comparison of Citibank actions and Citibank testimony in the 1994 

money laundering trial shows that the two were inconsistent concerning 

due diligence and know your customer practices in private banking. For 

example, Citibank’s testimony implied a stricter adherence to due diligence 

than actually occurred during the Salinas transactions.

Background The provision of financial and related services to wealthy clients is broadly 

described as “private banking.” The Federal Reserve System and OCC are 

two regulators that examine5

 banks and private banking activities. With 

3

 An account’s “beneficial owner” is the individual or group that controls the account.

4

 The Bank Secrecy Act is codified in 12 U.S.C. sections 1829b and 1951-59 and in 31 U.S.C. 

sections 5311-30.

5

 See 12 C.F.R. sections 21.21 (OCC) and 208.14 (Federal Reserve) (1997).
Page 3 GAO/T-OSI-00-3

regard to possible money laundering, examiners determine whether 

(1) banks comply with bank secrecy regulations and (2) the banks’ 

compliance programs include appropriate procedural guidelines for 

recording and reporting large currency transactions and for detecting, 

preventing,6

 and reporting suspicious transactions related to possible 

money laundering activities.

Regulators and most banks contacted during a previous GAO review7

 cited 

“know your customer” policies as one of an institution’s most important 

guidelines for detecting suspicious activity. Such policies enable the 

institution to understand the kinds of transactions that a particular 

customer is likely to engage in and to identify unusual or suspicious 

transactions. In an effort to protect itself from risks associated with money 

laundering and other unlawful activity, Citibank, as have other financial 

institutions, has implemented a know your customer policy to ensure that 

the bank will have a reasonable level of information about a client at the 

time of acceptance.

Citibank Facilitated 

Salinas Funds 

Transfers

Citibank New York accepted Mr. Salinas as a private banking customer and 

created the shell company Trocca through Cititrust (Cayman) to hold 

Mr. Salinas’s assets. As part of Trocca, Citibank created other shell 

companies and opened two investment accounts in Citibank London and 

Citibank Switzerland. However, no official U.S. documentation clearly 

connected Mr. Salinas to Trocca or the investment accounts. Disguising the 

origin and destination of the funds, which broke the funds’ paper trail, was 

accomplished by, among other actions, the depositing of the Mexican funds 

in a Citibank New York concentration account and Mrs. Salinas’s use of 

another name to initiate funds transfers in Mexico. (At the time of her 

introduction to Citibank Mexico officials to begin the transfers, 

Mrs. Salinas had not yet married Mr. Salinas. Although they were not 

married until the year after the transfers had begun, we refer to her 

throughout this testimony as Mrs. Salinas.) After Mr. Salinas’s March 1995 

arrest in Mexico, Citibank placed a watch on the Salinas accounts in 

Citibank New York and Trocca’s offshore investment accounts and 

prepared a financial profile that did not mention Trocca. After 

6

 Under 18 U.S.C. 1956, banks have a legal obligation to prevent money laundering.

7 Private Banking: Information on Private Banking and Its Vulnerability to Money 

Laundering (GAO/GGD-98-19R, Oct. 30, 1997).
Page 4 GAO/T-OSI-00-3

Mrs. Salinas’s November 1995 arrest in Switzerland, Citibank filed a 

criminal referral form8

 with the U.S. Department of Justice but again 

divulged no information about Trocca or the offshore accounts.

Citibank and Trocca In or about May 1992, Mr. Salinas met with the Vice President, Mexican 

Division, International Private Bank section of Citibank New York, to 

arrange a Citibank private banking relationship. At that time, Citibank 

waived bank references for Mr. Salinas. It relied instead on the referral of 

an existing client. In addition, Citibank did not follow its policy in that it did 

not prepare a financial profile, or financial background check, on 

Mr. Salinas before accepting him.

Citibank, according to its representative, first opened a checking account 

at Citibank New York in Mr. Salinas’s name and then, through Cititrust 

(Cayman), activated a private investment company named Trocca—a shell 

company—to hold Mr. Salinas’s assets.9

 The company was set up in the 

Cayman Islands, where all documentation connecting Mr. Salinas to Trocca 

was held and whose laws protect the documentation’s confidentiality.

To further insulate Mr. Salinas’s connection to Trocca, Cititrust (Cayman) 

used three additional shell companies to function as Trocca’s board of 

directors—Madeline Investment SA, Donat Investment SA, and Hitchcock 

Investment SA. Trocca’s officer and principal shareholder was another 

company formed by Cititrust (Cayman) named Tyler Ltd. Further, Confidas, 

a Cititrust affiliate located in Switzerland, acted as Trocca’s manager and 

handled all administrative requirements.

As part of Mr. Salinas’s private banking relationship, Citibank New York 

opened two investment bank accounts for Trocca, one in Citibank London 

and one in Citibank Switzerland. According to Citibank officials, Citibank 

London had no documentation or knowledge that Mr. Salinas was Trocca’s 

beneficial owner. We were informed that Citibank Switzerland had 

8

 The form has since been changed and is now known as the suspicious activity report.

9

As we noted in a previous report, Money Laundering: Regulatory Oversight of Offshore 

Private Banking Activities (GAO/GGD-98-154, June 29, 1998), banking regulators have 

expressed some concern that such private investment companies, among other offshore 

entities, may serve to camouflage money laundering and other illegal acts. This may occur 

because these accounts are formed, among other reasons, to maintain clients’ 

confidentiality and anonymity.
Page 5 GAO/T-OSI-00-3

documentation of a connection between Mr. Salinas and Trocca, which is 

required by and confidential under Swiss bank secrecy law.

The Funds Transfer To facilitate the periodic wire transfer of Salinas funds from Mexico to 

Citibank New York, Citibank New York’s Mexican Division VP introduced 

Mrs. Salinas, Patricia Paulina Rios Castañon de Salinas, to officials of 

Citibank Mexico under the name Patricia Rios. The Citibank representative 

initially told us that Mrs. Salinas’s true identity and connection to 

Mr. Salinas was disguised from Citibank Mexico officials reportedly 

because Mr. Salinas did not want to reveal that he was moving large sums 

of money out of Mexico. The Citibank representative stated that 

introducing Mrs. Salinas as Ms. Rios had not violated Citibank policy. Later, 

the representative and another Citibank official recanted the position 

concerning Citibank Mexico’s lack of knowledge. The officials told us they 

had no documentation to support their new position.

Throughout the transactions, according to Citibank’s representative, 

Mrs. Salinas withdrew funds from what is believed to be at least five 

Mexican banks10 and had the bank checks made payable to Citibank. After 

obtaining the bank checks and hand carrying them to Citibank Mexico, 

she—using the name Ms. Rios and although she had no account there—had 

Citibank Mexico convert the value of the bank checks from Mexican pesos 

to American dollars before it wired the funds to Citibank New York. 

Documents supporting the transactions further convoluted the paper trail, 

disguising the origin and destination of the funds and preventing them from 

being traced to Mr. Salinas.

Citibank Mexico then wired the converted funds, at the direction of 

Citibank New York’s Mexican Division VP, to Citibank New York. The funds 

went into a concentration account—a Citibank New York business deposit 

account that commingles funds of a number of bank branches/affiliates and 

bank customers.

Citibank next wired the funds from the concentration account to the 

Trocca accounts in Citibank London and Citibank Switzerland. The two 

offshore banks then invested the wired funds as directed by Citibank New 

10 Documentation listed the Mexican banks as Bancomer, Somex, Banca Cremi, Banorte, 

and Banco Mexicano. According to knowledgeable sources, Mr. Salinas’s accounts at these 

banks were under fictitious names.
Page 6 GAO/T-OSI-00-3

York and agreed to by Mr. Salinas. On occasion, however, Mr. Salinas had 

direct contact, concerning his investments, with a private banker at 

Citibank Switzerland where his confidentiality was ensured under Swiss 

bank secrecy laws.

According to the Citibank representative, the funds wired through Citibank 

Mexico and Citibank New York to Citibank London and Citibank 

Switzerland totaled between $90 million and $100 million. This Citibank 

official and others acknowledged that the fund transfers could have been 

wired to the Salinas checking account in Citibank New York or directly to 

Citibank London or Citibank Switzerland, thus retaining a paper trail.

The 1995 Salinas Arrests 

and Subsequent Account 

Actions

In late February 1995, according to Citibank’s representative, Mr. Salinas 

was arrested and jailed in Mexico for murder.11 At that time, rather than 

before accepting Mr. Salinas as a customer as was Citibank policy, Citibank 

prepared a very brief financial profile on Mr. Salinas. The profile cited no 

Citibank/Trocca accounts and no source of wealth other than a reference to 

an unidentified construction business.

Upon reportedly learning in early March 1995 that the arrested Mr. Salinas 

was a Citibank private banking customer, the Citibank representative, as 

Vice President for Legal Affairs, put a watch on the Salinas Citibank New 

York accounts and Trocca’s Citibank London and Citibank Switzerland 

accounts. However, according to the Citibank representative, the Mexican 

Division VP personally contacted Mrs. Salinas in Mexico in the summer of 

1995, without the representative’s knowledge or consent, and advised her 

to move all funds associated with Trocca out of Citibank. Mrs. Salinas was 

arrested in Switzerland in November 1995 for money laundering and drug 

trafficking while attempting to withdraw funds from a Swiss bank.

After Mrs. Salinas’s November 1995 arrest, according to the Citibank 

representative, Citibank New York filed a criminal referral form with the 

U.S. Attorney’s Office, Southern District of New York, sending copies to the 

Federal Bureau of Investigation and the Drug Enforcement Administration. 

11 Subsequently, Mexican law enforcement officials also charged Mr. Salinas with money 

laundering and "illegal enrichment." It has been reported that he was acquitted of one money 

laundering charge in May 1998 and that the illegal enrichment charge was dropped. 

However, as of October 1998 when our report was published, he remained in jail pending 

resolution of the murder charge. It was then unclear whether additional money laundering 

charges were still pending.
Page 7 GAO/T-OSI-00-3

However, the only Salinas accounts listed on the form were those in 

Citibank New York. The form did not cite the existence of Trocca or the 

Trocca accounts in Citibank London or Citibank Switzerland, purportedly 

because no official U.S. documentation existed although Citibank New 

York had facilitated the accounts’ formation.

According to Citibank’s representative, Citibank earned about $1.1 million 

in fees associated with the Salinas/Trocca accounts.

Citibank Violation of 

One Aspect of Know 

Your Customer Policy

Most of the actions of Citibank New York’s Mexican Division did not violate 

Citibank policy. However, the one aspect of Citibank’s know your customer 

policy that was violated—preparation of a financial profile—could have 

assisted in verifying the source of Mr. Salinas’s wealth and transferred 

funds. Citibank policy was revised in 1997.

A Violation of Citibank 

Know Your Customer Policy

According to the Citibank representative, Citibank New York’s Mexican 

Division believed that all of Mr. Salinas’s funds had been obtained legally, 

with a large portion resulting from the sale of a construction company that 

he owned. However, Citibank reportedly knew no details about the 

construction company including its name, who had purchased it, or the 

amount of money generated by the sale.12

In addition, when opening Mr. Salinas’s accounts, Citibank waived the 

requirement for two references for him, including its most common 

reference source, i.e., bank references, which could have contained such 

information as length of association with the account holder and size of the 

Mexican accounts. When asked if bank references were an important part 

of Citibank New York’s know your customer policy, the Citibank 

representative stated that Citibank private bankers had told him that bank 

references provided little value or information. We pointed out that if bank 

references had been obtained and checked, Citibank could have 

established the value of assets Mr. Salinas possessed in those banks and a 

12 According to the Citibank representative, Citibank New York’s Mexican Division, 

International Private Bank section failed Citibank’s internal audits from 1996 to 1997. These 

failures occurred because of problems and deficiencies in the Private Banking section’s due 

diligence and know your customer practices. The Citibank representative was unable to 

provide the results of internal audits conducted prior to 1996.
Page 8 GAO/T-OSI-00-3

banking history of those assets, both significant points for determining 

future suspicious account activity including money laundering.

Current Citibank Policy Citibank’s know your customer policy has been revised since the Salinas 

accounts were opened. As of September 1997, the policy contained more 

specific minimum standards of information for accepting a new customer. 

However, at the time of our October 1998 report, any element of the policy 

could still be waived for a new or existing customer.

Citibank’s General 

Compliance With Laws 

and Regulations Was 

Undetermined

We could not determine whether Citibank’s actions regarding Mr. Salinas’s 

private banking relationship had violated then applicable laws and 

regulations. We were denied access to Department of Justice officials 

involved in the then ongoing investigation of the Salinas/Citibank 

relationship. We were also denied access to the principal Citibank officials 

involved with that relationship, although Citibank designated bank officials 

to provide us with detailed information.

Comparison of 

Citibank’s Actions With 

a Citibank Official’s 

1994 Testimony

The requested comparison of Citibank actions regarding Mr. Salinas and a 

Citibank official’s testimony in a 1994 money laundering case13 illustrated 

that the two were inconsistent. Citibank New York’s actions did not reflect 

the importance that its Mexican Division VP placed on the bank’s due 

diligence/know your customer practices when testifying.

The head of Citibank New York’s Mexican Division, International Private 

Bank section, who was also involved in the Salinas matter, appeared as an 

expert witness for the government in the 1994 money laundering trial. In 

sworn testimony, the division VP explained the importance of due diligence 

principles and Citibank’s know your customer policy in accepting and 

working with private banking customers.

However, Citibank actions regarding Mr. Salinas contrasted sharply with 

the VP’s sworn testimony with concern to the importance of knowing the 

customer. For example, the Citibank VP affirmed in sworn testimony that 

Citibank New York’s international relationship managers were to make an 

extensive effort to know their potential customers, as a way of protecting 

13 United States v. Giraldi, No. 93-CR-28-6 & 7 (S.D. Tx. 1994).
Page 9 GAO/T-OSI-00-3

the bank, before accepting them. It was “too risky not to ... do the due 

diligence, not to know who you’re dealing with” before accepting a 

prospective customer’s funds in a private banking relationship. In contrast, 

Citibank made no attempt to investigate Mr. Salinas’s background before 

accepting him. Citibank was unable to confirm if the division VP had met 

Mr. Salinas before accepting him as a Citibank private banking customer. 

Further, Citibank did not file a financial profile, or a financial background 

check, as part of due diligence.

Conclusions At the time of our investigation, the Congress and the Federal Reserve 

recognized that financial institutions could abuse voluntary policies with 

regard to potential money laundering. Further, we determined in the 

Salinas scenario that Citibank’s voluntary controls did not work. Citibank, 

while violating only one aspect of its then policies, facilitated a 

money-managing system that disguised the origin, destination, and 

beneficial owner of the funds involved. We determined that the Department 

of Justice investigation of the Salinas/Citibank relationship is still pending 

in the Southern District of New York.

Contacts and 

Acknowledgement

For further information regarding this testimony, please contact Robert H. 

Hast or Ron Malfi at (202) 512-6722. John Ryan made a key contribution to 

this testimony.

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