By Brett Wolf, Compliance Complete

NEW YORK, May 20, 2014 (Thomson Reuters Accelus) – Although investigators with Treasury’s anti-money laundering unit tried to identify a senior business leader at MoneyGram International Inc who could be penalized over the money transfer giant’s admitted compliance failures, available evidence left them only one viable target – the firm’s former chief compliance officer, a former official with firsthand knowledge of the investigation said.

The push by Treasury’s Financial Crimes Enforcement Network (FinCEN) to send a stern message to the financial services community by targeting one of its own with a large fine began roughly a year and a half ago due to pressure from Capitol Hill. FinCEN investigators eyed a number of current and former MoneyGram employees, but found that senior business leaders had not left an evidence trail to follow.

However, investigators uncovered “strong” evidence suggesting that former compliance chief Thomas Haider played a key role in the anti-money laundering compliance lapses MoneyGram conceded in 2012 as part of a settlement with the Justice Department, the source said.

The source, who is now in the private sector and asked not to be named, refused to describe the specific evidence against Haider, citing concern that doing so would violate federal law.

Haider’s lawyer, Ian Comisky, a partner with Blank Rome in Philadelphia, did not respond to a request for comment.

FinCEN previously declined to comment on the Haider matter.

The decision to seek out someone at MoneyGram who could be held responsible for the firm’s compliance failures was handed down by FinCEN director Jennifer Shasky Calvery shortly after she assumed her post in September 2012, two former officials who were with the bureau at the time said.

An exclusive article published by Compliance Complete a month ago revealed FinCEN is pursuing Haider and plans to penalize him as much as $5 million for his role in the breakdown in the firm’s controls aimed at detecting, and ultimately reporting to the government, transactions linked to criminal activity.

The regulatory action against Haider has not been resolved. Still, Haider last month was asked to take an indefinite leave of absence from his job lobbying for a league of credit unions over the matter, as previously reported by Compliance Complete.

Making an example

After Compliance Complete uncovered FinCEN’s pursuit of Haider, many in the compliance community questioned why a former compliance professional was targeted, why a multi-million dollar fine seemed appropriate to the Treasury bureau, and why it opted to punish someone linked to MoneyGram rather than a banker at HSBC or another institution. This article seeks to provide answers.

Shasky chose MoneyGram, at least in part because unlike banks, money transfer businesses and their employees have no other federal regulator capable of penalizing them for non-compliance with anti-laundering rules, sources with firsthand knowledge said. Shasky has said publicly that her priorities as FinCEN director include bringing the money transfer industry into better compliance with anti-laundering rules.

Still, HSBC, which in December 2012 agreed to pay $1.9 billion to settle allegations it allowed drug cartels to wash hundreds of millions of dollars, was a driving force behind Shasky’s decision, the sources said. The settlement prompted Senate hearings where regulators were chastised for not catching the problem sooner and for failing to punish the individual bankers responsible.

When David Cohen, Treasury’s undersecretary for terrorism and financial intelligence, testified at a Senate Banking Committee hearing in March 2013, it was clear he felt the congressional pressure to hold individuals responsible for financial institutions’ anti-money laundering failures.

Cohen, who is Shasky’s boss, told the lawmakers that FinCEN had been instructed to look for opportunities to hold individuals accountable.

Evidence available to FinCEN investigators suggested that Haider, who was chief compliance officer of MoneyGram during most of the time it operated with anti-laundering weaknesses in the 2000s, was the right person to make an example of, the former official with firsthand knowledge said.

Public policy implications

The former FinCEN official said top officials at the bureau were mindful of the public policy implications of targeting a compliance officer, adding there were high-level discussions about the fact that moving forward, a practitioner might be more reluctant to cooperate with law enforcement officials and regulators “if he is worried that what he says might be used against him to try to take his house away.”

“All of this is complicated. It’s easy when you’re in the Senate to say ‘Do this,'” the source said.

FinCEN has decided that the same calculation used to determine the maximum size of a penalty against an institution should be used when penalizing an individual, the source said, describing it as a “mechanical exercise.”

The number of Bank Secrecy Act reports that were not properly made is tallied, as are the number of days when the institution operated with an inadequate anti-money laundering program, and these failures each have a specified maximum penalty attached, the source said.

The fact that a compliance officer is the subject of an enforcement action, regardless of the amount, “will cause all compliance officers to think” about their choice of professions, said Rob Rowe, a lawyer with the American Bankers Association’s Center for Legal and Regulatory Compliance.

FinCEN’s fine against Haider coupled with added regulatory pressure on compliance officers in the wake of the HSBC settlement and an “onslaught” of new regulations could “lead to a shortage of compliance officers,” Rowe said.

“No one will want to do the job,” he said.

In fight over fine, Haider would face U.S. prosecutor in Manhattan

If a penalty is assessed to Haider and he refuses to pay, the Justice Department would be called upon to represent FinCEN in District Court.

Typically the DoJ’s Federal Programs division would handle such a matter, but not in this case.

At the request of FinCEN, Preet Bharara, the U.S. Attorney in Manhattan, agreed to litigate the matter if necessary, two sources said. A spokeswoman for Bharara’s office declined comment.

(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)