On January 8, the United States District Court for the District of Minnesota denied the motion of defendant Thomas E. Haider to dismiss the federal government’s complaint seeking to hold Mr. Haider personally liable for violations of the Bank Secrecy Act and its implementing regulations (collectively, the BSA) by MoneyGram International, Inc. (MoneyGram) during his tenure there as chief compliance officer. Order Denying Motion to Dismiss, U.S. Dep’t of Treasury v. Haider, No. 15-CV-01518, 2016 WL 107940 (D. Minn. Dec. 18, 2014) (the Opinion). Among other things, the court (i) affirmed that a compliance officer responsible for the development and oversight of an anti-money laundering (AML) program may be held liable for the BSA violations of his or her employer and (ii) reserved judgment as to whether the proposal to bar Mr. Haider from service to any U.S. financial institution is a punitive sanction subject to the statute of limitation or a prophylactic measure that is not so limited.
For a more fulsome account of the government’s allegations, please see a previous Sidley Update, “FinCEN Seeks Civil Money Penalty and Injunction Against Former Chief Compliance Officer of MoneyGram,” available, here. Briefly, the U.S. Attorney for the Southern District of New York on behalf of the United States Financial Crimes Enforcement Network (FinCEN) filed a complaint against Mr. Haider on December 18, 2014, alleging that Mr. Haider was personally liable for MoneyGram’s failure to implement an effective AML compliance program and properly file suspicious activity reports (SARs), in each case during the period from 2007 to 2008, as required under the BSA.1 FinCEN is seeking a $1 million civil monetary penalty against Mr. Haider and to enjoin Mr. Haider from participating in the conduct of any U.S. financial institution. This case is significant because it is uncommon for FinCEN to sue a money services business compliance officer personally for the AML failures of his employer.
Mr. Haider’s motion to dismiss is based on five principal arguments:
- An individual officer of a financial institution may not be held personally liable for the institution’s failure to implement an effective AML policy.
- The complaint does not sufficiently particularize the bases for the amount assessed.
- The injunctive relief sought is time-barred.
- FinCEN’s access to the grand jury materials underlying its complaint was improper.
- The assessment and injunction violate Mr. Haider’s constitutional due process rights.
The court’s response to each argument and its reasoning are discussed in turn below.
1. Individual compliance officers such as Mr. Haider may be held liable for the failure of a financial institution to maintain an effective AML policy.
The court rejected Mr. Haider’s argument that liability for failure to implement an AML program extends only to institutions under 31 U.S.C. § 5318(h)(1) (“each financial institution shall establish [AML] programs”). The court looked to 31 U.S.C. § 5321(a)(1), which provides:
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, willfully violating this subchapter or a regulation prescribed or order issued under this subchapter (except sections 5314 and 5315 of this title or a regulation prescribed under sections 5314 and 5315) ... is liable to the United States Government for a civil penalty...
The court said:
Section 5321(a)(1)’s explicit reference to “partner[s], director[s], officer[s], and employee[s]” demonstrates Congress’ intent to subject individuals to liability in connection with a violation of any provision of the BSA or its regulations, excluding the specifically excepted provisions. ... Because § 5318(h) is not listed as one of those exceptions, 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.
Opinion at 6-7. Accordingly, the court denied Mr. Haider’s motion on this ground.
2. The $1 million assessment was sufficiently particularized in the complaint.
The court treated Mr. Haider’s challenge to the assessment amount as a challenge to the sufficiency of the complaint and held that “the $1 million penalty is amply supported by the allegations underlying the SAR violations alone.” Opinion at 7. An exact determination of the proper amount would be “premature” at the dismissal stage. Id. at 7-8.
3. The court deferred its determination of which statute of limitations, if any, applied to the injunctive remedy sought by the government.
The court declined to address Mr. Haider’s claim that a five-year limitations period applied to bar the injunction per 28 U.S.C. § 2462 (five-year period for “an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise”). It reasoned that such a determination would require a factual inquiry into whether the injunction is punitive and thus within the statute or, as the government argued, prophylactic. Opinion at 9.
4. The court declined to revisit the order of the Pennsylvania district court granting FinCEN access to grand jury materials.
The court rejected Mr. Haider’s argument that FinCEN’s access to grand jury materials from the government’s investigation into MoneyGram was improper under 18 U.S.C. § 3322. The court reasoned that the final order of the Pennsylvania district court granting access “specifically recognized FinCEN’s need to disclose grand jury information to attorneys assigned to advise and represent FinCEN in [any] civil injunctive and penalty matter in the Southern District of New York, and to make such further disclosures as may eventually be necessary in any administrative proceeding or civil litigation commenced under [the BSA].” Opinion at 2-3. The court declined “to vacate an order of another federal district court.” Opinion at 10.
5. Mr. Haider’s due process rights have not been implicated because he has not yet suffered a deprivation of a liberty or property interest.
The court rejected Mr. Haider’s argument that his due process rights under the Fifth and Fourteenth Amendments were violated by an insufficient preassessment process, FinCEN’s failure to disclose certain materials, alleged bias on the part of FinCEN director Shasky Calvary or FinCEN’s alleged leak of confidential information. The court determined that Mr. Haider had not suffered a deprivation of a property or liberty interest:
[A]lthough Haider’s property interests are ultimately at stake, the underlying administrative process did not deprive him of such interests. Rather, the assessment procedure is merely the first step in the process. The BSA expressly authorizes FinCEN to assess a civil penalty and then commence a civil action to recover that penalty. ... Indeed, the government acknowledges that it must await judgment from this court before it may collect the assessment. ... Likewise, the government’s requested injunction is not included in the assessment and must be imposed by the court. As a result, to date, Haider has not yet been deprived of his property interests.
Opinion at 12. The court noted that Mr. Haider would have the opportunity to engage in discovery, explore the government’s case and raise any available defenses. Opinion at 12.2
After addressing, or deferring decision with respect to, each of Mr. Haider’s arguments as described above, the court denied in its entirety Mr. Haider’s motion to dismiss. Opinion at 13. The parties have been ordered to appear for a pretrial conference to discuss settlement and pretrial matters.