MoneyGram CCO Pays Civil Penalty
Like any other profession, the compliance profession is not immune to bad apples. Lawyers know the law but have been criminally prosecuted for breaking the law. The same goes for compliance professionals.
If the compliance profession wants to build credibility, it has to adopt professional standards and it has to accept when a bad apple is appropriately punished. Instead of claiming that prosecuting CCOs will cause the profession harm, CCOs have to acknowledge when a fellow compliance officer crosses the line.
Thomas Haider, the CCO at MoneyGram, was properly punished for his failures and his affirmative steps to obstruct MoneyGram’s compliance program. This was not even a close case.
Haider agreed to pay a $250k civil penalty and to a three-year bar from serving as a compliance officers at a money transmitter. The civil enforcement action was brought by the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”), with the assistance of the US Attorney’s Office for the Southern District of New York.
MoneyGram is a money transfer service that allows customers to transfer money through a global network of agents and outlets. Haider was MoneyGram’s chief compliance officer, and had direct oversight responsibility for MoneyGram’s Fraud Department and AML Compliance Department.
In 2006 and 2007, MoneyGram’s Fraud Department proposed that MoneyGram implement a policy for terminating agents and outlets that presented a high risk of fraud. A proposed policy was given to Haider but he failed to act on it because of objections from MoneyGram’s Sales Department.
In 2007, MoneyGram’s Fraud Department proposed terminating a number of outlets in Canada based on the fact that the cited outlets were responsible for approximately 58 percent of all fraud occurring in Canada during a six-month period. Additionally, the cited outlets had specific characteristics that Haider and other members of the Fraud and Compliance Departments recognized were strong indicators that the outlets were involved in fraud. Subsequently, one operator of several outlets plead guilty to criminal fraud and admitted that his money outlets were heavily involved in fraud schemes.
Notwithstanding all of the evidence presented to Haider, he did not exercise his authority to terminate any of the agents because of opposition from the Sales Department.
In 2007, Haider deliberately structured MoneyGram’s AML program to restrict analysts’ access to critical information concerning aggregate fraud analyses, and specific analysis of individual outlets over set time periods. Haider restricted access to such information with the apparent intention to prevent analysts from generating information needed to support the filing of a SAR. As a result, even though there were a number of MoneyGram outlets that were identified as engaged in consumer fraud, MoneyGram did not file any SARs for these entities.
MoneyGram never audited any of these outlets, and in fact, the agents were permitted to open additional outlets.
In considering Haider’s conduct, it is important to remember that he was charged with civil violations – not with criminal violations. The government’s burden of proof is far lower than a criminal case – a preponderance of the evidence.
Considering these facts, it is hard, if not impossible, to sympathize with Haider’s settlement. He deliberately ignored or frustrated serious compliance issues, even stretching his conduct to deliberately obstruct enforcement of MoneyGram’s compliance program, and the legally-required filing of SARs for suspected fraud. Some might feel that Haider got off lightly; some may think he should not have been punished at all. However, it is hard to defend Haider’s conduct.
In this context, the compliance profession needs to remind itself that it has to be held accountable for criminal or civil violations, and more importantly, the profession needs to develop professional standards to govern its responsibilities and ethical requirements.