A Citigroup executive testified under oath yesterday during Senate hearings on money laundering that she can't remember what she meant when she told a fellow employee in a taped telephone conversation, "You and I are little pawns in this whole thing, okay?"

The executive, Amy Elliott, had that conversation on March 1, 1995, just after she learned that one of her top clients, Raul Salinas, the brother of the former president of Mexico, had been arrested for murder.

Her testimony came during the first day of hearings by the Senate's Permanent Subcommittee on Investigations into Citigroup's secret transfer of hundreds of millions of dollars for wealthy foreign politicians or their relatives during the 1990s through a global web of bank accounts.

The subcommittee intends to shed light on the lucrative world of private banking by focusing on several of Citigroup's private-banking clients, including Salinas, and as much as $100 million in what Mexican authorities alleged was drug money the bank secretly transferred out of Mexico from 1992 to 1994 on his behalf. Salinas was convicted in Mexico earlier this year of murder, but officials there have dropped drug-trafficking charges.

Sources say the decision to drop those charges has stymied federal criminal prosecutors who are investigating whether Citigroup engaged in money laundering in the Salinas affair.

A major issue explored by the Senate subcommittee's chairman, Susan Collins (R-Maine) and, its senior Democrat, Carl M. Levin of Michigan, yesterday was why top Citigroup officials, including chief executive John S. Reed, knew about but paid little heed to internal bank audits in the 1990s warning that the private-banking unit was vulnerable to money laundering.

Reed, who testified before the committee for more than an hour, said he was troubled by the audits but at the time knew of no specific instances in which the bank had facilitated money laundering. Despite several trips to Mexico during the early 1990s, and despite widespread newspaper accounts at the time of Salinas's possible involvement in drug smuggling, Reed said he did not know about Salinas's reputation or that he was a bank client.

Reed said he was told after one golf game that Salinas might be engaging in questionable business activities, but said he didn't pass that information on to Citigroup's private bankers because he didn't think he needed to.

In retrospect, he said, the bank erred in several instances when Elliott and other private bankers failed to follow internal bank procedures to protect it against money laundering.

Top bank regulators from the Federal Reserve Board and the Office of the Comptroller of the Currency, a unit of the U.S. Treasury, felt the audits were so significant that in late 1997 and early 1998 they went to Citigroup's board to underscore the need to take action. At the same time, Robert B. Shapiro, chairman of Monsanto Corp. and then the head of the audit committee of Citigroup's board of directors, went to Reed and told him he had to be more responsive to the audits and clean up the private-banking unit.

Subcommittee investigators say Reed began aggressive action to fix the private-banking division's problems only in 1997 and did not become successful until well into 1998, when Citigroup needed federal regulators' approval of its now-completed merger with insurance giant Travelers Group. Citigroup officials say they would have acted at the same speed with or without the need for the deal approval.

Money laundering is the process of taking money gained from illegal activities, such as selling drugs, and sending it through a series of financial transactions that make the money and its true owners hard to trace and identify. Often these transactions are undertaken by banks' private-banking units, which cater to rich individuals who wish to move money around in secret to avoid taxes or other encounters with governments.

During the taped telephone conversations, Elliott said that "in the very, very top of the corporation this was known," which she testified meant that Citigroup Vice Chairman William R. Rhodes knew Salinas was a private-bank client.

Later in the conversation Elliott makes several references to speaking to "God," though she testified yesterday that she can't remember what she meant by that.

At one point in the phone call she says that "after I speak to God I will pass it on to you, but my inclination is not to do anything that, that would look like were trying to, to cover up things, to do things . . .," and she adds that "his right-hand man is comfortable."

The Citigroup officials say "God" was not a reference to Reed, as some subcommittee staffers suspect. The officials said after the hearing that they believe Elliott's reference to a right-hand man was to Hubertus Rukavina, head of Citigroup's private bank at the time. By "God," they said, she meant the general public.

When asked by reporters yesterday if he was "God," Reed laughed.

"John Reed is not 'God,' " Citigroup spokesman Michael Schlein said.

After Salinas was arrested, Citigroup employees had other taped phone conversations that a report by Levin's staff says shows that "the private bank's institutional reaction was not to assist law enforcement, but to determine whether the Salinas accounts should be moved to Switzerland to make discovery of the assets and bank records more difficult."