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FinCEN Levies Unprecedented $1 Million Fine Against Former MoneyGram Exec

ACAMS - By Kira Zalan and Colby Adams - 14-12-18 Click here for original article       Back to Articles

The United States Thursday fined a former chief compliance officer for MoneyGram $1 million for his alleged role in compliance violations that led to the company's 2012 deferred prosecution agreement.

In a written assessment of the fine, the U.S. Treasury Department's Financial Crimes Enforcement (FinCEN) said Thomas E. Haider knowingly ignored signs of a longstanding telemarketing scheme that tricked thousands of Americans into wiring millions of dollars to locations in Canada on the premises that they had won the lottery, secured loans or been hired as secret shoppers.

Haider, a 16-year veteran at MoneyGram before leaving in 2008, resisted concerns raised by other executives and mid-level staffers about the potential complicity of individual agents who were later convicted for profiting from the scheme, FinCEN said. MoneyGram paid $100 million in November 2012 for failing to identify the fraud.

The bureau, which levied the unprecedented fine in conjunction with the U.S. Southern District of New York, also directed Haider to cease working in the financial industry. Haider now serves as the executive vice president for Austin, TX-based Cornerstone Credit Union League, according to his LinkedIn profile.

"FinCEN's action today marks the first time, to our knowledge, that the government has filed suit to hold an individual compliance officer personally responsible for alleged anti-money laundering compliance failures of his employer," said the law firm Blank Rome, which represents Haider, in a statement.

Unprecedented, but expected

The "enormous penalty" against a compliance officer will complicate efforts by financial institutions to fill top anti-money laundering positions, according to Ralph Sharpe, an attorney at Venable LLP who previously worked in the U.S. Office of the Comptroller of the Currency.

"This action appears to lay total responsibility for compliance failures at the feet of the compliance officer," said Sharpe. "The problem is, a lot of compliance officers don't have final decision making authority. They can flag problems, recommend changes [and] report to the board, but can't unilaterally take action," he said.

Under the Bank Secrecy Act, compliance officers responsible for regulatory violations are liable for fines as high as $25,000 per day that the problems exist. The government can also levy civil monetary penalties as large as $100,000 for each instance an individual fails to file a suspicious activity report.

The expected fine, first reported by Reuters in April, was not without warning.

In March 2013, U.S. Undersecretary for Terrorism and Financial Intelligence David Cohen told members of the Senate Banking Committee that FinCEN was actively seeking to penalize individual bankers who violated the Bank Secrecy Act.

Earlier this year, the Financial Industry Regulatory Authority fined a former Brown Brothers Harriman compliance officer $25,000 for failing to prevent AML violations, a penalty that spurred some industry professionals to seek assurances of indemnification from their employers and inquire about personal insurance.

In April, ACAMS moneylaundering.com reported that FinCEN is preparing an unrelated fine against a second individual.

Egregious violations

In making their case, FinCEN and the Southern District of New York alleged that Haider consistently refused to respond to red flags or hold agents accountable for suspicious behavior.

Despite receiving spreadsheets generated by the MSB's fraud database and purportedly showing high numbers of consumer fraud reports from the company's Canadian operations, Haider failed to discipline agents involved and ignored or rejected two written policies that would have punished outlets with potential fraud problems, FinCEN said.

Four MoneyGram outlets suspected of facilitating fraud were owned or operated by James Ugoh, a Nigerian tribal chief living in Toronto at the time of the fraud. Ugoh is currently serving a 12-year sentence in the United States for his role in the telemarketing fraud.

Despite the fact that law enforcement officials subpoenaed data on Ugoh's outlets, Haider did not file a SAR on the companies or Ugoh.

When questioned by investigators looking into complicity from MoneyGram employees, Haider initially refused to testify or cooperate, according to an individual with knowledge of the matter.

The person, who believes that Haider received a substantial severance package as part of his resignation in 2008, said that the former compliance chief had characterized internal investigations and consumer fraud complaints as "lacking evidence."

A spokesperson for MoneyGram said that the company could not comment on the matter except to say that it has amended its management, organizational structure and programs since Haider's departure.

In addition to its 2012 settlement, MoneyGram paid the U.S. Federal Trade Commission $18 million in October 2009 to resolve related charges.

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