Former MoneyGram compliance chief facing potential record fine regarded as anti-laundering innovator

October 6, 2014

In the late 1990s former MoneyGram International Inc executive Thomas Haider was a compliance leader pushing the money transfer industry to do more to fight financial crime, convincing his and other firms to voluntarily police transactions for illicit activity and report to authorities, a former official with the Treasury Department’s anti-money laundering bureau says.

A decade and a half later, six years after Haider left his post as MoneyGram’s compliance chief, Treasury’s Financial Crimes Enforcement Network (FinCEN) has threatened him with an unprecedented, multi-million dollar civil penalty. It has said he is personally liable for the money transfer giant’s failures to do what was required under the Bank Secrecy Act (BSA), the U.S. anti-money laundering (AML) law, to keep criminals out of the U.S. financial system during the mid-to-late 2000s, sources say.

Some compliance experts, including a former FinCEN official who worked with Haider in varying capacities for about 15 years, were stunned when Thomson Reuters months ago revealed FinCEN’s enforcement push. Peter Djinis, a former FinCEN policy official who now is in private practice, said earlier this week he decided to speak out publicly because he thought Haider’s past AML achievements should be weighed against accusations.

“There were never any incidents where I would question his commitment to anti-money laundering, his commitment to professionalism, his attitude and enthusiasm, he had all of that,” Djinis said.

Thomson Reuters reported in April that FinCEN had notified Haider he may be penalized up to $5 million for his alleged role in MoneyGram’s failures to comply with the Bank Secrecy Act (BSA). The company in 2012 admitted the lapses — including failures to report to authorities that the company’s agents were involved in fraud schemes — as part of a deferred prosecution agreement (DPA) with the Justice Department.

Although Djinis is the only person who has defended Haider publicly, many compliance professionals are discussing the matter, and several said privately they are troubled by FinCEN’s push. Without knowing its purported facts, they worry Congressional pressure on regulators to hold financial services professionals accountable for compliance lapses may have caused Haider to take the fall for business executives whose profit-driven decisions permitted criminal abuses.

The crux of their concern is that AML officers consider themselves the “good guys” who work to uncover illicit activity while struggling to earn respect and authority from senior management and the board members.

One senior compliance officer at a large, multinational bank said that if FinCEN penalizes Haider, he and his peers will not rest easy unless the Treasury bureau makes public a set of facts that show “willful, borderline illegal acts.”

Advocate of voluntary compliance

Djinis said he had a “good, professional” relationship with Haider that began in the mid-1990s when Djinis was at FinCEN and MoneyGram instituted a policy of closer cooperation with the Treasury unit on AML matters. The relationship continued after Djinis left the government and did legal work for MoneyGram.

Haider held several different positions at MoneyGram between 1992 and 2008 and was named compliance chief in late 2005.

A year before leaving the company, he provided testimony to a congressional financial services subcommittee in which he argued for creation of a federal regulator to ensure consistent oversight of the industry and legislation to help money transfer businesses access banking services.

Prior to joining MoneyGram, Haider spent seven years as a lobbyist for the Minnesota League of Credit Unions. When he left MoneyGram he spent several years as a compliance consultant before becoming a lobbyist for the Cornerstone Credit Union League in Texas, a job he held until news of the FinCEN matter became public and he was asked to take an indefinite leave of absence.

Neither Haider nor his lawyer, Ian Comisky, responded to requests for comment. Neither has publicly commented to date.

FinCEN spokesman Steve Hudak declined comment. FinCEN has declined all comment on the Haider case since it was first disclosed.

In an emailed statement, MoneyGram spokeswoman Michelle Buckalew declined comment “on potential actions FinCEN may or may not take” against Haider. The statement added: “As always, we cooperate with law enforcement and regulatory authorities.”

For most of Haider’s tenure at MoneyGram, the money transfer industry, unlike banks, had few AML obligations and was not required to report suspicions of criminal activity to authorities. It was not until 2003 — after the Sept. 11, 2001 attacks prompted Congress to enact the Patriot Act — that regulations were issued requiring the industry to take such action.

Nevertheless, in the late 1990s MoneyGram developed an automated program to detect suspicious patterns of money order purchases, such as those made at different locations on the behalf of the same person or entity, Djinis said. He added that the cooperation was so novel that MoneyGram had to make use of forms intended for banks.

“MoneyGram was instrumental, and Tom (Haider) personally was instrumental, in having his own firm voluntarily filing Suspicious Activity Reports and encouraging other members of his industry to do the same,” Djinis said. “There was no form for them to do this, so they were using the bank form, filling in the relevant information and making it clear it was being filed by a (money transfer firm) and not a bank.”

An email circulated when Haider left MoneyGram in May 2008, which was signed by then-CEO Philip Milne, said Haider had been “the primary architect of our anti-money laundering compliance program.” The message, which was obtained independently by Thomson Reuters, added that Haider would continue working with the company in a consulting capacity.

In a recommendation offered on LinkedIn in 2010, one of Haider’s former managers at MoneyGram stated he was “adept at developing strategies for the legislative agenda that impacted” the company and added that he “excelled at providing ‘out of the box’ solutions in a very complex global regulatory environment.”

Another former manager, who recommended Haider in 2009, said he “built MoneyGram’s anti-money laundering compliance program from the ground up and turned it into an industry leading program.”

Unnamed senior AML executive cited in DPA

MoneyGram agreed to forfeit $100 million and admitted it aided agents’ fraud and failed to comply with the BSA between 2003 and 2009 in the 2012 DPA with the Justice Department.

The lapses occurred mostly during the period when Haider was compliance chief. They also came, in part, at a time when MoneyGram had just suffered steep losses when selling mortgage-backed securities during the financial crisis and was in heated competition with rival Western Union Co.

The U.S. Justice Department said MoneyGram processed thousands of transactions for its agents who often tricked victims into wiring them money by posing as relatives or promising large cash prizes. The company received thousands of complaints from customers who said they were victims of the fraud, but the company failed to terminate the agents that it knew were involved, the Justice Department said.

A set of facts made public as part of MoneyGram’s DPA stated that the company’s AML “senior director” described some of the company’s money transfer agents as “the worst of the worst” and “beyond anyone’s ability to doubt that the agent had knowledge and involvement” in fraud. It added that this person refused to conduct on-site audits of some agents running “criminal operations” due to “physical danger” to auditors. It did not name the executive in question, however.

The document added that MoneyGram “structured” its AML program so that employees responsible for reporting suspected criminal activity to authorities did not have access to the fraud department’s database of consumer complaints. Some in the compliance community considered this statement a clear signal that all financial institutions must take care to integrate their fraud and AML units to avoid prosecutorial scrutiny.

FinCEN, which is under pressure from Congress to force the financial services industry to better comply with anti-money laundering rules and to punish individuals for non-compliance where appropriate, decided to pursue Haider as a way to send a message to the compliance community, a former official has told Thomson Reuters. FinCEN has no criminal authority, but can issue civil penalties to people and businesses over AML failures.

The source added that FinCEN investigators, who had access to evidence gathered by the Justice Department in its criminal probe of MoneyGram, had failed to find evidence that senior business executives were responsible for the compliance lapses, but they were able to document what the source called strong evidence of Haider’s role. The source has declined to elaborate, citing potential legal concerns.

Haider’s lawyer has been in talks with FinCEN since May. A source recently told Thomson Reuters that the talks were expected to conclude any day, although the outcome remained unclear.

While a multi-million dollar fine would be unheard of, smaller fines are more 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.

Djinis said it is difficult for him to believe that Haider deserves harsh punishment.

“It doesn’t ring true,” Djinis said. “I worked with Tom for 14 years, maybe 15 years, and to me he deserves the benefit of the doubt.”

(This article was produced by the Compliance Complete service of Thomson Reuters Accelus. Compliance Complete provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Accelus compliance news on Twitter: @GRC_Accelus)

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