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Citigroup Faces Federal Probe After Discovering $400 Million Fraud in Mexican Unit

NEW YORK (TheStreet) -- Federal authorities are investigating Citigroup after the bank disclosed it discovered $400 million in fraudulent loans at its Mexican unit, Banamex, according to the New York Times.


The U.S. government has opened an investigation into Citigroup's (C) Mexican unit over $400 million in fraudulent loans, according to a report by the New York Times.

Citigroup disclosed in February that it discovered the fraudulent loans in its Mexican subsidiary, Banamex, that were made to Mexican oil services company Oceanografia.  Citigroup said that at least one Banamex employee processed falsified documents in order to give the company a loan it cannot repay.

U.S. federal authorities now are investigating Citigroup's internal controls and whether the bank ignored warning signs of the fraud.  The investigation is being overseen by the FBI and prosecutors from the U.S. attorney's office in Manhattan, and Citi also faces a civil probe by the Securities and Exchange Commission.

The investigations come soon after the Federal Reserve rejected Citi's capital plan as part of its stress tests.

At last check, shares of Citi were falling more than 1.6% to $47.45.

In New York, I'm Brittany Umar for TheStreet.

-- Written by Brittany Umar in New York.

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