Where Are They Now? The First-Ever Case Against a Compliance Officer over Failure to Implement Anti-Money Laundering Program

February 5, 2017

moneygramBy: Sara Kropf

Nearly two years ago, I wrote about the government’s civil complaint filed against the former Chief Compliance Officer of MoneyGram.

The defendant in that case is still fighting and the case appears headed for trial.

As a quick reminder of the case:

The Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) recently sued MoneyGram International Inc.’s former CCO, Thomas Haider. FinCEN accuses Mr. Haider of having a direct role in MoneyGram’s failure to file required suspicious activity reports (SARs) and failure to implement an adequate Anti-Money Laundering (AML) system. MoneyGram entered into a 2012 deferred prosecution agreement over this conduct.

Although the court denied his motion to dismiss, Mr. Haider filed a counterclaim and is trying to file another one. His claims are based, in part, on supposed leaks by FinCEN to the media about his case.

I love the fact that Mr. Haider continues to battle the government over these allegations. He’s not making it easy for FinCEN to push its theory of liability. I’m not aware of any similar cases being brought (but correct me if I’m wrong), so this lawsuit alone may be delaying the government’s reliance on this theory of liability in other cases.

Let’s take a look at what has happened since I first wrote about the case in March 2015.

Denial of Motion to Dismiss

Mr. Haider filed a motion to dismiss the complaint. He challenged FinCEN’s ability to impose an individual fine under the Bank Secrecy Act, arguing that § 5318(h) states that “[i]n order to guard against money laundering through financial institutions, each financial institution shall establish anti-money laundering programs.” Because the statute required entities to implement AML programs, it could not be enforced against individuals.

In January 2016, the district court denied his motion. It held that the statute’s civil penalty provision, which permits penalties against a “partner, director, officer, or employee” of an entity. The court wrote:

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.

Also interesting was Mr. Haider’s procedural due process argument. As summarized by the court:

Finally, Haider argues that the complaint should be dismissed because the government’s assessment violates his right to procedural due process. Haider specifically argues that his due process rights have been violated because (1) FinCEN is not subject to regulations requiring it to afford meaningful pre-assessment process and review; (2) FinCEN did not allow him to review all relevant materials, thereby preventing him from effectively rebutting FinCEN’s case against him; and (3) FinCEN’s director was biased against him given her prior work in the MoneyGram matter. Haider also argues that the government disclosed the investigation to the media, which caused Haider’s employer to fire him, and compounded the due process violations.

The court refused to dismiss based on this argument but did allow the parties to proceed to discovery on them.

Mr. Haider’s Counterclaim

In February 2016, Mr. Haider filed his answer and included a counterclaim. The allegations described supposed news leaks by FinCEN about the case against him. It alleges that these news leaks led to his termination from MoneyGram and that he “remains unemployed to this day.”

The single count in the counterclaim is under the Privacy Act of 1974. This act protects the private information about individuals held by the government (and allows individuals to obtain copies of records about themselves).

According to the counterclaim:

The Treasury, through its officials, agents and/or employees, intentionally and/or willfully disclosed and/or made available to others the contents of records maintained in one or more Privacy Act systems of records pertaining to Mr. Haider, including but not limited to information about the investigation being conducted on Mr. Haider, in violation of federal regulations and in violation of the Privacy Act of 1974, 5 U.S.C. § 552a.

It goes to allege that the leaks to the media violated the Privacy Act and that the government failed to keep an appropriate record of its disclosures to the media.

The government did not move to dismiss the counterclaim. It answered and (not surprisingly) denied the allegations.

Mr. Haider’s Proposed Amended Counterclaim

In December 2016, Mr. Haider sought leave to file an amended answer and amended counterclaim. Specifically, he wanted to add four additional affirmative defenses and one count under the Administrative Procedures Act.

He wanted to include a counterclaim that FinCEN’s Interim Final Rule was improper under the APA. Apparently, the Interim Final Rule upon which FinCEN relied was published without a proper notice-and-comment period.

The government, of course, opposed the motion. First, it argues that the court has already concluded that the penalties section of the BSA overrides the provision that it is only an entity’s obligation to implement an AML program. Second, it argues that a procedural challenge to the Interim Final Rule is time barred because the limitations period to challenge a regulation is six years.

The government’s opposition was filed February 1, 2017, so there’s no decision yet. Discovery is set to end in May 2017.

Overall, I’m seriously impressed by Mr. Haider and his counsel’s efforts. It’s hard enough to keep up the fight during a criminal case but a civil case is often more expensive, given all of the motions practice and discovery requests flying back and forth. Plus, it is often easier to resolve a civil case and it can be tempting to get the case done and move on with your life.

But someone has to push back on the government when it seeks to adopt a new theory of liability like this one. Mr. Haider is on his way to becoming the hero of the compliance officer world. No matter how this turns out, he’ll have his pick of speaking engagements to talk about this fight.

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