Carlos Salinas and his associates are also affected by Elliott’s decision. As the former president of Mexico, Carlos Salinas’ and his family’s reputation would be collapsed once Raul Salinas was convicted as the money launderer or murder. Furthermore, his enemies would take this advantage to gain political power in Mexico.
Citibank branches including Mexico, New York, Switzerland, and London are affected. Since Salinas’s substantial money was wired from Mexico branch to New York branch. Then, the concentration account transferred the funds to Citibank Switzerland and some deposited at London branch. If these transactions were found out involves illegal actions, those branches were responsible for such unlawful transactions, leading Citibank’s reputation collapse.
What changes?
Citibank was the first foreign bank in Mexico and provides very personal service. Because it initially established the solid relationship with wealthy clients in Mexico and provides very personal services, Salinas was primarily introduced to use Citibank’s service to meet his confidentiality needs.
Another trigger is the Salinas’s social background. Since Salinas is brother of the Mexican president and also is Citibank’s CEO’s friend, securing the Salinas’s account could not only promote the Mexico Team’s profile, but also possibly Elliott’s career. Both the political power and the potential benefits encourage Elliott to ignore the KYC policy. Unlike managing regular clients’ accounts, she started to manage Salinas’s accounts without bank references and background checks.
The indirect trigger is the offshore banking secrecy. Most offshore jurisdictions provide great protections of privacy. Hence, many investors take this advantage to conceal their substantial wealth. Such legal loophole encourages some illegal activities like money laundering. In this case, Salinas was instructed to open five shell companies and the secrecy law protected the owner’s name from disclosure. This protection enacted in secrecy law helps Salinas’s transactions privately, but this may involves potential money-laundering actions
Ethnic issue
Elliott fails to meet her professional responsibility. First, she violated the Citibank’s “know your customer” (KYC) policy. She did not complete a financial profile by verifying Salinas’s financial history and the source of his wealth until Salinas was arrested in 1995. Furthermore, she did not record any identifying information about the source of Salinas’s funds. Second, when opening Salinas’s account, Elliott waived the requirement for references. Although the reference waiver did not violate internal bank’s policy, bank references were important for knowing the value of assets possessed by Salinas, and those assets records could be helpful to determine future suspicious account activity.
Elliott is also fail to be responsible to herself. Elliott’s testimony in 1994 money laundering case illustrates the inconsistent actions regarding to Salinas’s account. As the witness, Elliott emphasized the importance of due diligence principles and Citibank’s KYC policy in managing private banking customers. She states the principles and policy as part of Citibank’s “culture” and “the way you conduct yourself” (p, 115). However, Elliott’s real actions contrasted sharply with KYC policy that she provided in testimony.
Honesty, trust, and integrity. Elliott built up the trust with Salinas due to his public figure. She said that we should trust Mexican officials if we know them. However, such trust cannot be the reason to waive the bank reference and background checks. Thus, She has to process Salinas’s account as regular clients rather than relying on Salinas’s public status. Furthermore, Salinas’s honesty to Elliott is questionable. His explanations about the source of funds, the purpose of concealing his identity, even the reason of murder investigation were not convinced. His reasons somehow seem dishonest.
The United States banking secrecy law is also questionable. According to the United States secrecy law, the banks operating in U.S. have exempted form liability to report all financial transaction above $10,000. Also, the offshore baking secrecy laws provide greater protection of privacy. These secrecy laws provide comparative advantage for Salinas to transfer $100 million outside of Mexico without revealing his name. If Salinas’s funds come from illegal actions, such secrecy law triggers money laundering.
Ethics of the bank regulations in U.S are problematic. Although Citibank has very strict procedures when opening new accounts, many cases shows that bankers did not follow the strict procedures as they thought bank reference is not useful. This issue is common in US banks. According to the Federal Bank of New York, in general, client profile contains insufficient information in terms of client’s background, source of wealth and their account activities.
Alternative 1-Deny cooperating with Swizz narcotics agents
The first option for Elliott is to deny cooperating with Swizz narcotics agents. Since Salinas is her private client, Elliott has responsibility to keep her client’s confidentiality. Moreover, because there’s no evidence proved that Salinas’s guilty, Salinas may be probably falsely accursed by his political enemies. On the other hand, If Elliott cooperates, and the result shows that Salinas is innocent; Citibank’s reputation will be damaged if Elliott discloses her client’s information. Furthermore, the agents asked Elliott to lay a trap to her clients. It would be considered as an improper way to deal with her clients.
Alternative 2-Cooperate with Swizz narcotics agents
Cooperating with Swizz narcotics agents with discussing with Citibank’s legal affair would be helpful for the criminal investigation. The major concern is weather Elliott’s cooperation would violate the Swizz bank’s secrecy law. According to Swizz’s law, the Swiss judge has power to overturn secrecy obligation for the purpose of criminal investigation. That means Citibank would not violate the secrecy law if Elliott cooperates with the legal mandate. Furthermore, since Elliott had already greatly violated KYC policy regarding to managing Salinas’ accounts, cooperation could be considered as a way to make up her liability.
Choice of the alternative
Cooperating with Swizz narcotics agents would be the best options. Elliott has obligations to cooperate with Swiss authorities to investigate the suspensions account, which can be a purpose of know you customer policy. Elliott never noticed Salinas’s suspicious account until she was told that Salinas was under murder investigation. If Swizz agents found out that Salinas did involve in money laundering, Elliott would probably face 10 years imprisonment due to violation of KYC policy. If Elliott cooperates with Swizz agents, her punishment could be alleviated as she was trying fulfilling her KYC obligation through her cooperation. Moreover, Elliott has obligation to report any activity regarding to Salinas’s account to legal affairs. The Citibank’s legal affairs would like to help Elliott to cooperate in the investigation if cooperation is under the Swiss law. Furthermore, the legal affair may come up with a better idea to get the document rather than laying a trap to their client. Thus, it is better for Elliott to discuss with Citibank’s vice-president of vice-president first, and then cooperate with Swiss narcotics agent.
Reference
Wesley, David T. A.(1999). Citibank Mexico Team: The Salinas Accounts. Sharp, David J.(Ed), Case in business ethics (108-117). Thousands Oaks. California: Sage Publications.