Brazil scandal hits Citibank
by Conal Walsh Sunday September 9, 2001 The Observer
Citibank faces fresh money-laundering controversy after up to $200 million, allegedly looted from Brazil in a major political scandal, turned up at the bank's Jersey branch.
Brazilian prosecutors will apply to the Channel Island's attorney-general to freeze a Citibank bank account they suspect belongs to Paulo Maluf, former mayor of São Paulo and one of the country's best-known politicians.
Brazil's parliament is investigating allegations that Maluf diverted money from public coffers into offshore accounts when in office during the Eighties. Maluf, also a former conservative presidential candidate, denies wrongdoing and is scheduled to give evidence to the parliamentary enquiry tomorrow.
In Jersey, police and the island's financial regulator are questioning Citibank over the suspect account. According to Brazilian reports, the Jersey account is held by a Cayman Islands company which Maluf is alleged to own. The money was reportedly transferred to Jersey in 1997 from Citibank's Swiss branch.
The US bank is understood to have become suspicious and alerted authorities in Jersey and Brazil. A spokesman said: 'We do not comment publicly on customer matters, including whether somebody is or ever was a customer.' Clive Jones, head of Citibank in the Channel Islands, refused to comment.
There is no suggestion of dishonesty on the bank's part, but the affair is potentially embarrassing: Citibank was criticised by the US Senate in 1999 over lax private banking controls. Stolen money was funnelled through the bank by relatives of politicians such as President Carlos Salinas of Mexico, and the late Nigerian dictator Sani Abacha.
The episode could also prove awkward for Jersey, which has faced international criticism over its corporate secrecy laws.