Updated from 2:17 p.m. EST

Citigroup

(C) - Get Report

could see an exodus of wealthy foreign depositors, now that the U.S. government is taking an ever-larger stake in the tottering giant, says a prominent bank analyst.

Foreign deposits make up roughly two thirds of Citigroup's total deposits, according to the bank's third quarter financial statements. Richard Bove, an analyst with Rochdale Securities, says a large portion of those deposits are people who are trying to hide money from their local governments.

"If you're a rich guy in Venezuela and you want to protect your money, you put it in the Citigroup bank in Venezuela and you can immediately convert it into dollars without question and you can move it into New York without question so that you don't have to worry about whatever Chavez may come up with in terms of a new political alignment," Bove says. "That has always been a major source of deposits for Citigroup all around the world."

Bove adds that Citigroup's attempt to expand these footholds into dominant retail banking platforms in places such as Germany and Japan have been unsuccessful. Citigroup sold its German retail unit last year and is currently shopping its Japanese brokerage business. It is also reported to be shopping its Japanese investment bank.

Citigroup was forced to close its private banking operations in Japan in 2004 after it allowed suspicious transactions that "could be suspected of being associated with money laundering," according to published reports.

Citi spokespeople did not immediately respond to an email message.

Bove points to ongoing efforts by U.S. government officials to get

UBS

(UBS) - Get Report

to turn over the names of its depositors suspected of illegally avoiding U.S. taxes.

Bove says other large U.S. banks like

JPMorgan Chase

(JPM) - Get Report

and

Wells Fargo

(WFC) - Get Report

are too "parochial" to move in on Citi's foreign turf. However he expects Citi's lost deposits could go to Spanish banks like

Banco Santander

(STD)

and

Banco Bilbao Vizcaya Argentaria

(BBV)

, among others.