Exclusive - U.S. weighs $5 million fine against ex-MoneyGram compliance chief

ST. LOUIS Thu Apr 17, 2014 3:18pm BST

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ST. LOUIS (Reuters) - The U.S. Treasury Department has notified a former compliance chief at MoneyGram International Inc that he may face a fine of up to $5 million (2 million pounds) over the money transfer giant's previously admitted failures to properly police transactions for illicit activity, sources familiar with the matter said.

Several months ago Treasury's Financial Crimes Enforcement Network (FinCEN) sent a letter to Thomas Haider, who was MoneyGram's chief compliance officer when the anti-money laundering lapses occurred, notifying him of the potential multi-million dollar penalty, the sources said.

They added that Haider and his legal counsel are expected to meet with FinCEN officials early next month to argue that he should not face a penalty.

FinCEN's push to hold Haider personally liable comes as the Justice and Treasury departments, as well as regulators, face pressure from Congress to hold accountable individuals at financial services firms where systemic anti-laundering failures have occurred and opened the U.S. financial system to criminal abuse.

Smaller penalties levied against individuals are increasingly common. In February, Wall Street's industry-funded watchdog, the Financial Industry Regulatory Authority, announced that New York-based investment firm Brown Brothers Harriman had agreed to pay $8 million over "substantial" anti-money laundering lapses. Its compliance officer, Harold Crawford, was personally fined $25,000.

A multi-million dollar penalty against a person accused of playing a role in an institution's anti-laundering failures would be unprecedented, however. That would send shock waves through the compliance profession and perhaps cause some top executives to rethink their decisions to do such work, compliance officers who asked not be named said.

Haider left MoneyGram in 2008 after 16 years with the firm, according to his LinkedIn profile. During 2008, Haider received more than $1.8 million in total compensation, although the lion's share of that money was part of a severance package, a 2009 filing with the Securities and Exchange Commission states.

Haider, who according to his LinkedIn profile now is a lobbyist for a league of credit unions in Texas, Oklahoma and Arkansas, did not respond to telephone and email messages seeking comment.

FinCEN spokesman Steve Hudak declined comment.

MoneyGram spokeswoman Michelle Buckalew said the company "is not aware of whether (FinCEN) is planning to issue any penalty against any former MoneyGram employee."

MONEYGRAM SETTLEMENT WITH JUSTICE DEPARTMENT

In November 2012 MoneyGram, the world's second-largest money transfer company, agreed to forfeit $100 million and admitted it aided in wire fraud and failed to maintain an effective anti-money laundering program, according to court documents filed as part of a Deferred Prosecution Agreement (DPA) with the Justice Department.

Between 2003 and 2009, the company processed thousands of transactions for its own agents who often tricked victims into wiring them money by posing as relatives or promising large cash prizes, the U.S. Justice Department said.

It added that MoneyGram received thousands of complaints by customers who were victims of the fraud, but failed to terminate the agents that it knew were involved.

The company also admitted it failed to maintain an effective anti-money laundering program in violation of the Bank Secrecy Act (BSA), in part because of its failures to report the agents involved in the fraud.

FinCEN has the authority to impose civil penalties for anti- money laundering compliance failures and sometimes acts in concert with the Justice Department when it uses criminal authorities to punish a financial institution. Former Treasury Department officials, however, said FinCEN had reviewed the facts of the case and chose not to penalize MoneyGram or its employees at the time of the DPA.

A NEW CHIEF AT FINCEN

The MoneyGram matter was spearheaded by the Justice Department's Asset Forfeiture and Money Laundering Section, which at the time was led by Jennifer Shasky Calvery, who played a significant role. Weeks before the DPA was finalized, Shasky left Justice to become the director of FinCEN.

Shasky revamped the Treasury bureau's enforcement unit, adding staff and assigning another former federal prosecutor to run it. Ensuring that non-bank financial institutions such as casinos and money-transfer outfits toe the line on anti-money laundering compliance is one of Shasky's top priorities for the enforcement unit, sources familiar with the matter said.

The more aggressive enforcement unit concluded that action against Haider was appropriate, the sources said.

PRESSURE TO ACT

Some members of Congress, including Sen. Elizabeth Warren, a Massachusetts Democrat, voiced concern about a perceived lack of personal accountability in anti-laundering matters after British banking giant HSBC in December 2012 agreed to pay a then record $1.9 billion to resolve charges it laundered drug money from Mexico. No individual bankers faced criminal or civil penalties in that case.

At a Senate Banking Committee hearing in March 2013, David Cohen, Treasury's undersecretary for terrorism and financial intelligence, said FinCEN would "look for more opportunities" to issue penalties to "partners, directors, officers and employees" of financial institutions "who themselves actively participate in misconduct."

(Reporting by Brett Wolf of the Compliance Complete service of Thomson Reuters)

(Editing by Randall Mikkelsen)

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