With a new CEO in charge and seemingly good improvements, international bank CitiGroup has had to readjust its 2013 earnings. The culprit is the bank's Mexican branch, Banamex, which was victim of a multimillion-dollar fraud at the hand of an oil company. The impact of the losses will affect the whole CitiGroup and not just the Mexican bank.

According to the New York Times, Banamex made the mistake of lending money to Oceanografia (OSA), an oil services company that supplies Mexican oil company Pemex. CitiGroup learned of the incident from Mexican government reports of suspended contracts. Subsequently, the bank and Pemex investigated OSA to assess the damage. As much as $400 million were misappropriated in the fraud, according to CitiGroup.

Fox Business reports that CitiGroup extended about $585 million in short-term credit to OSA through Banamex. The amount was to be repaid through an accounts receivable financing program. However, following the investigation, it was learned that "significant portions" of the accounts receivable in connection with Pemex were fraudulent and the valid receivables were much less than the amount given. Indeed, CitiGroup asserts that only $185 million could be verified, which means there would be a loss of $400 million.

The New York Times explains the program:

"Banamex would advance money to Oceanografía to provide services to Pemex. The oil giant would then pay back Banamex, verifying invoices provided by Oceanografía to confirm that the work was completed."

But Banamex also lent $33 million directly to OSA.

CitiGroup emphasizes that the only account compromised is OSA's. In a memo sent to all Banamex employees, CEO Michael Corbat said, "I can assure you there will be accountability for those who perpetrated this despicable crime and any employee who enabled it, either through lax supervision, circumvention of our controls, or violating our Code of Conduct."

It is suspected at least one Banamex employee was involved in the fraud.

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