Compliance Officer Legally Responsible for Control Failures

Washing-MachinesA U.S. District Court in Minnesota ruled that compliance officers and other individuals can be held responsible for anti-money laundering control failures under the Banking Secrecy Act, dealing a setback to a former chief compliance officer who was hit with a $1 million fine by the Financial Crimes Enforcement Network.

The fine by FinCEN against former MoneyGram Chief Compliance Officer Thomas Haider made waves in 2014 as a rare case of a compliance team member being held responsible for control failures. FinCEN’s action stems from the money transfer company’s $100 million settlement with the U.S. government in 2012, in which MoneyGram admitted to wire fraud and money laundering control violations. In the case against Mr. Haider, closely followed by the compliance community, defense lawyers challenged the ability of FinCEN to levy an individual penalty under the provisions it cited in the Banking Secrecy Act. Mr. Haider’s lawyers previously called the action ”unfounded” and the wrong case in which to establish a reinforced principle of individual responsibility. In his denial of a motion to dismiss, U.S. District Court Judge David Doty ruled that the provision of the act that requires institutions establish money laundering programs is governed by the act’s broader civil penalty provision, which allows penalties against a “partner, director, officer, or employee.”

“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,” Mr. Doty wrote. Mr. Haider’s attorney also contended he was deprived of due process rights by bias and press leaks, the fine was unduly large and the penalty was time barred. Mr. Doty decided those issues should be decided after discovery took place. Mr. Doty also declined to rule against FinCEN’s use of grand jury materials in the U.S. government’s case against MoneyGram that was later used to bring the case against Haider.