On December 18, 2014, the United States Attorney for the Southern District of New York filed on behalf of the United States Financial Crimes Enforcement Network (FinCEN) a 146-paragraph civil complaint in the United States District Court for the Southern District of New York against Thomas Haider, former Chief Compliance Officer for MoneyGram International Inc. (MoneyGram). Complaint, U.S. Dep’t of Treasury v. Haider, No. 14-CV-9987 (S.D.N.Y. Dec. 18, 2014), ECF No. 1 (the Complaint). The Complaint seeks monetary and injunctive relief from Haider in his personal capacity, alleging a willful failure to (i) implement an effective anti-money laundering (AML) compliance program, and (ii) properly file suspicious activity reports (SARs), in each case as required under the Bank Secrecy Act and the implementing regulations (collectively, the BSA).
- The Complaint alleges that, during the period from November 15, 2007 to May 23, 2008 (the Assessment Period) and other relevant times, Haider:
- Supervised the MoneyGram AML Compliance Department and Fraud Department;
- Was responsible for ensuring BSA compliance;
- Was a member of MoneyGram’s Senior Leadership Team, an executive management group whose members reported directly to MoneyGram’s Chief Executive Officer;
- Turned a “blind eye” to fraudulent activities repeatedly called to his attention, thereby enabling them; and
- Failed to file SARs as required under the BSA.
The underlying fraudulent activity occurred at various MoneyGram outlets located primarily in Canada, New York and Texas during the Assessment Period. Broadly, Haider is alleged to have failed to implement AML controls, discipline or terminate agents, conduct AML audits effectively, or file SARs properly, and to have ignored numerous “red flags” or warning signs of fraud.
FinCEN assessed a $1 million civil monetary penalty (CMP) against Haider on December 18, 2014 for his “willful failure to ensure that MoneyGram (i) implemented and maintained an effective AML program, and (ii) filed timely SARs.” In the Complaint, the United States seeks to reduce the CMP to a judgment of personal liability against Haider, together with an injunction barring Haider “from participating, directly or indirectly, in the conduct of the affairs of any ‘financial institution’ (as that term is used in the BSA . . . ) that is located in the United States or conducts business within the United States, for a term of years — to be determined at trial — sufficient to prevent future harm to the public.”
The Complaint is significant because it is highly uncommon, and possibly unprecedented, for FinCEN to hold a compliance officer personally responsible for the AML failures of an employer.”
Legal Underpinnings of the Complaint
MoneyGram provides money transmission services to the public and is a “money services business” (MSB), a subset of the broader term “financial institution,” within the meaning of the BSA. Under the BSA, an MSB must, among other requirements: (i) implement an effective AML program that is reasonably designed to prevent the MSB from being used to facilitate money laundering and the financing of terrorist activities; and (ii) report suspicious transactions relevant to a possible violation of law or regulation.
As generally explained in the Complaint, an MSB that does business through agents must, in connection with its AML program, conduct reasonable due diligence and risk-monitoring on its agents to help ensure that such agents are not complicit in illegal activity involving the MSB’s products and services and to allow the MSB to identify and, where appropriate, report as suspicious activity. Such an MSB also should establish procedures for dealing with agents that present unreasonable risks of money laundering or the financing of terrorism.
FinCEN is authorized under the BSA to impose CMPs on financial institutions and their partners, directors, officers and employees for willful violations of the BSA. The amount of a CMP is capped at the greater of $25,000 or the amount involved in the transaction (if any), not to exceed $100,000. Violations of the requirement to maintain appropriate procedures to ensure compliance with the BSA or to guard against money laundering constitute a “separate violation . . . for each day the violation continues and at each office, branch, or place of business at which a violation occurs or continues.” 31 U.S.C. § 5321(a)(1). The CMP was calculated based on the Assessment Period. The Complaint also seeks injunctive relief based on Section 5320 of the BSA:
When the Secretary of the Treasury believes a person has violated, is violating, or will violate [the BSA] or order issued under [the BSA], the Secretary may bring a civil action in the appropriate district court of the United States . . . to enjoin the violation or to enforce compliance with the [BSA] or order.
31 U.S.C. § 5320.
Factual Allegations Concerning MoneyGram’s Lack of an Effective AML Program
The Complaint alleges that Haider failed to implement a policy for disciplining or terminating agents or outlets, despite advice from external counsel and the MoneyGram Director of Fraud. Haider is alleged to have learned from MoneyGram personnel of fraudulent activity by MoneyGram agents or outlets, or the suspicion thereof, and continued to grant the agents or outlets permission to “use MoneyGram’s money transfer system to facilitate their fraudulent schemes.”
The United States claims that Haider knew or should have known that certain agents posed at least an unreasonable risk of fraud. The Complaint relies in large part on a spreadsheet Haider is said to have received by email in April 2007 (the April 2007 Spreadsheet). The April 2007 Spreadsheet listed “approximately 30 outlets that the Fraud Department had previously recommended for termination, plus additional outlets that it was also recommending be terminated or at least sent warning letters and then very closely monitored,” covering the six month period from September 2006 through February 2007. It noted a number of Canadian agents/outlets participating in various frauds.
These Canadian agents/outlets appearing on the April 2007 Spreadsheet, their underlying frauds and Haider’s response, underlie much of the Complaint. They, and others from the April 2007 Spreadsheet, allegedly were characterized by MoneyGram’s Director of AML Compliance as “egregious and beyond anyone’s ability to doubt that the agent had knowledge and involvement.” According to the Complaint, the entities on the April 2007 Spreadsheet “(i) had an excessively high number of received money transfers reported as fraudulent; (ii) had an excessively high percentage of their total number of received money transfers reported as fraudulent; (iii) had an excessively high percentage of their received money transfers originate from the United States; and/or (iv) received more money transfers than they sent.” The Complaint states that “developed countries like the United States and Canada typically send (i) money transfers to less-developed countries, and (ii) more money transfers than they receive. The Complaint alleges that Haider did not terminate the agents/outlets appearing on the April 2007 Spreadsheet, despite receiving recommendations that they be closed.
The Complaint also alleges that, under Haider’s control, SAR analysts did not have access to sufficient information to file SARs — specifically, SAR analysts did not have access to the Fraud Department’s Consumer Fraud Reports. The underlying cause is alleged to be that MoneyGram under Haider’s watch maintained each relevant department in a separate “silo.” Moreover, Haider allegedly failed to ensure that MoneyGram conduct proper “risk-based” audits of prospective and existing agents/outlets, despite notice of high risk characteristics. Also, due to Haider’s alleged inaction, MoneyGram reportedly lacked a coherent diligence process and ignored warning signs when it came to authorizing new agents, or expanding into new outlets. Mr. Haider continues to dispute FinCEN’s allegations.