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Friday
May052017

Former Moneygram compliance chief pays $250,000 penalty for AML failures

The former Chief Compliance Officer of MoneyGram International, Inc. reached a settlement Thursday with FinCEN and the DOJ after he was held personally responsible for his company's anti-money laundering failures.

Thomas E. Haider agreed to pay a $250,000 penalty and be barred from working as a compliance officer for any money transmitter for three years.

The settlement ended the DOJ's action against Haider to enforce a $1 million fine that FinCEN imposed against him in December 2014.

FinCEN said then that Haider failed to ensure that MoneyGram complied with the anti-money laundering provisions of the Bank Secrecy Act.

Haider didn't file suspicious activity reports on agents he knew or suspected were engaged in fraud, money laundering, or other criminal activity, FinCEN said. And he failed to perform adequate due diligence or audits or terminate known high-risk agents.

His lawyers argued that the Bank Secrecy Act didn't allow individuals to be held responsible for corporate AML failures. They also said FinCEN's actions violated Haider's due process rights.

But federal judge David Doty cited language in the Bank Secrecy Act allowing penalties against a “partner, director, officer, or employee.”

“The plain language of the statute provides that a civil penalty may be imposed on corporate officers and employees like Haider, who was responsible for designing and overseeing MoneyGram’s AML program,” Judge Doty said.

In a 2012 federal settlement, Dallas-based MoneyGram paid $100 million to compensate fraud victims.

Scammers told victims they'd won the lottery or been hired for a “secret shoppers” program. Others were duped to believe they'd been approved for a guaranteed loan or had won a cash prize.

The fraudsters convinced victims to use MoneyGram’s transfer system to send them up front taxes, customs duties, or processing fees. Many victims were elderly.

The government said Haider could have stopped the fraud. He ran MoneyGram's compliance program and anti-fraud department from 2003 to 2008.

In late 2014, FinCEN filed a complaint with the U.S. Attorney for Manhattan to enforce the $1 million penalty and to bar Haider from working in the financial industry. The case was transferred to Minneapolis, where Haider moved to dismiss the DOJ's enforcement action.

One of Haider's lawyers, Ian Comisky, said in 2014 that FinCEN's action was overreaching. "While the current government mantra is for heightened individual responsibility, this is the wrong case to try to establish this principle."

Judge Doty approved Thursday's settlement to end the litigation.

In the settlement, Haider admitted that he failed to terminate specific MoneyGram outlets "after being presented with information that strongly indicated that the outlets were complicit in consumer fraud schemes."

FinCEN is the Treasury Department's Financial Crimes Enforcement Network.

Jamal El-Hindi, FinCEN's acting director, said Thursday that "compliance professionals occupy unique positions of trust in our financial system. . . . Holding [Haider] personally accountable strengthens the compliance profession by demonstrating that behavior like this is not tolerated within the ranks of compliance professionals.”

Haider told news outlets Thursday that proposals made by MoneyGram's fraud department to terminate and discipline agents at its outlets had been blocked  by the sales division. He said MoneyGram's anti-money laundering programs were audited by state regulators more than three dozen times.

"The AML compliance program was deemed satisfactory by the regulators as well as the outside expert consultants," he said.

China's Ant Financial is now trying to acquire MoneyGram. The acquisition needs U.S. regulatory approval.

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Richard L. Cassin is the publisher and editor of the FCPA Blog.

Reader Comments (1)

I am surprised the Internal Audit function and the Directors have not been penalized as the Chief Compliance Officer.

The directors, representing the institution, have the primary responsibility to establish an independent audit function, designation of a compliance officer and instituting training schemes to employees as part of an effective AML program. If there has been a total breakdown I fail to see how the directors can absorb themselves of any responsibility to implementing an effective AML program. The independent audit function should be blamed as well for failing to establish a process to identify high risk (including AML schemes) scopes for regular and through reviews. The Chief Compliance Officer should not be the only officer bearing this cross.

Furthermore, it would seem the court ruling would require CCOs to have some sort of liability insurance in financial institutions in view of the volume of transactions a CCO will have to contend with to ensure these comply with the AML program.
May 7, 2017 | Unregistered CommenterJonas A. AYI
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