The U.S. Securities and Exchange Commission is investigating Citigroup for accounting fraud after it disclosed bogus loans in its Mexican Banamex unit, a source familiar with the investigation said.

The securities regulator is also examining whether Citigroup violated the Foreign Corrupt Practices Act, the source said.



(Read more: Citi discovers Mexico fraud)

An employee at Banamex has been questioned by Mexican police after being suspected by the bank of involvement in the loan scheme, another source familiar with the police investigation said.



It was unclear whether more than one person was involved, that source said.



Citigroup said on Friday it had found $400 million in bad Banamex loans and was reducing its full year profit by $235 million to $13.67 billion, after the bank had first reported its 2013 earnings more than one month ago.