A federal district court this month upheld a $1 million fine imposed against the former chief compliance officer for MoneyGram International, finding that individual officers, including chief compliance officers, of financial institutions may be held responsible for ensuring compliance with the anti-money laundering provisions of the Bank Secrecy Act.
As Compliance Week previously reported, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) imposed the fine in December 2014 against Thomas Haider for failing to ensure that his company abided by the AML provisions of the Bank Secrecy Act. Concurrently, the U.S. Attorney’s Office for the Southern District of New York filed a complaint in U.S. District Court that seeks to enforce the penalty and bar Haider from future employment in the financial industry. The parties later agreed to transfer the case to the U.S. District Court for the District of Minnesota.
As CCO for MoneyGram from 2003 to 2008, Haider oversaw its Fraud Department and AML Compliance Department. Acting on complaints to the Fraud Division, he could have suspended or terminated any agents that were participating in illicit activity.
Instead, “his inaction led to thousands of innocent individuals being duped out of millions of dollars through fraud schemes that funneled, and sometimes laundered, their illicit profits through MoneyGram’s money transmission network,” FinCEN said in a statement.
According to FinCEN, Haider also failed in his responsibility to ensure the filing of suspicious activity reports on agents whom he knew or had reason to suspect were engaged in fraud, money laundering, or other criminal activity. By failing to file SARs, “he denied critical information to law enforcement which could have been used to combat the fraud and dismantle the criminal networks,” FinCEN said.
MoneyGram allegedly profited from the scheme by collecting fees and other revenues on the fraudulent transactions from 2004 to 2009. In November 2012, the company agreed to forfeit $100 million and enter into a deferred prosecution agreement with the Justice Department.
Haider filed a motion to dismiss the Treasury Department’s complaint against him, arguing that Section 5318(a) of the BSA establishes that financial institutions—not individuals—must establish an AML program. In the case, U.S. Department of Treasury v. Haider, the U.S. District Court for the District of Minnesota on Jan. 8 disagreed with Haider’s reasoning.
The court ruled that BSA’s more general civil penalty provision, Section 5321(a), must be applied in this case. Specifically, that section authorizes the imposition of civil penalties against a “domestic financial institution or nonfinancial trade or business, and a partner, director, officer, or employee of a domestic financial institution or nonfinancial trade or business.”
In his motion to dismiss, Haider raised several other reasons why the case should be dismissed, including that:
The government’s request for injunctive relief should be dismissed as time-barred;
FinCEN should not have been permitted to rely on improperly obtained grand jury materials; and
FinCEN violated his due process rights.
The court, however, declined to decide on these issues, thus, denying Haider’s motion to dismiss.