On May 3 2017 the former chief compliance officer (CCO) of MoneyGram, Thomas E Haider, and the Financial Crimes Enforcement Network (FinCEN) jointly filed a "Stipulation and Order of Settlement and Dismissal" in the US District Court of Minnesota.(1)
In December 2014 FinCEN filed a complaint against Haider which sought to hold him personally liable for MoneyGram's violations of the Bank Secrecy Act and its implementing regulations during his tenure as chief compliance officer (for further details please see "FinCEN seeks penalty and injunction against former CCO").(2) Among other things, the complaint sought to reduce to judgment FinCEN's $1 million administrative penalty against Haider.(3)
The settlement requires Haider to pay $250,000 and agree to a three-year prohibition from "performing a compliance function for any 'money transmitter' (as that term is used in the [Bank Secrecy Act]...) that is located in the United States or conducts business within the United States". FinCEN has agreed to release Haider from "any civil or administrative claims for monetary or injunctive relief" for conduct alleged in the complaint and to dismiss the complaint with prejudice on receipt of the settlement amount.(4)
The settlement contains a series of admissions by Haider, including the following:
- As CCO, he had "direct supervisory authority over MoneyGram's Fraud and [Anti-money Laundering (AML)] Compliance Departments" and "authority to implement a policy for terminating or otherwise disciplining MoneyGram agents and outlets".(5)
- "MoneyGram's AML Compliance Department failed to conduct adequate audits of many of those agents/outlets [identified by the Fraud Department as having accumulated a disproportionate number of consumer fraud reports], and certain of the agents were permitted to open additional outlets."(6)
- MoneyGram had failed to implement a policy proposed by the Fraud Department for "terminating or otherwise disciplining agents and outlets that presented a high risk of fraud", although outside counsel had represented to the Federal Trade Commission that MoneyGram had planned to do so, because the "policy was not approved by MoneyGram's Sales Department".(7)
The court so-ordered the settlement and on May 4 2017 entered judgment against Haider in the amount of $250,000.(8) Acting FinCEN Director Jamal El-Hindi offered the following statement in the agency's press release:
"We have repeatedly said that when we take an action against an individual, the record will clearly reflect the basis for that action. Here, despite being presented with various ways to address clearly illicit use of the financial institution, the individual failed to take required actions designed to guard the very system he was charged with protecting, undermining the purposes of the [Bank Secrecy Act]. Holding him personally accountable strengthens the compliance profession by demonstrating that behavior like this is not tolerated within the ranks of compliance professionals."
Acting US Attorney Joon H Kim, whose office brought the complaint on FinCEN's behalf, added:
"By failing to terminate MoneyGram outlets that presented a high risk for fraud and to take other actions clearly required of him, Haider allowed criminals to use MoneyGram to defraud innocent consumers."(9)
The Haider action has been brought to a close, but it remains to be seen how its resolution could affect the recent enforcement focus on holding compliance professionals personally liable for violations by the financial institutions they represent.
For further information on this topic please contact Joel D Feinberg, David E Teitelbaum or Stephen Wallant at Sidley Austin LLP by telephone (+1 202 736 8000) or email ([email protected], [email protected] or [email protected]). The Sidley Austin website can be accessed at www.sidley.com.
(1) US Department of Treasury v Haider (15-CV-01518, ECF No 122 (D Minn May 3 2017)). The settlement is available here.
(2) Additional information on Haider can be found here.
(3) The court declined Haider's motion to dismiss on January 8 2016. Haider filed various counterclaims against FinCEN on February 19 2016.
(4) Settlement at 9-10, 12, 15 (citations are to page numbers due to inconsistent formatting of settlement paragraph numbers). Haider agreed to dismiss his counterclaims. Id at 15.
(9) Press release, FinCEN, "FinCEN and Manhattan U.S. Attorney Announce Settlement with Former MoneyGram Executive Thomas E. Haider" (May 04, 2017).