GamblingCompliance: AML Compliance Lawyers Cautious After MoneyGram Deal

10TH MAY 2017 | WRITTEN BY: CHRIS SIEROTY

Anti-money laundering (AML) and gaming law experts believe a settlement of civil charges brought by the federal government against a former MoneyGram compliance executive may make it harder to find quality applicants for AML compliance roles in casinos and other financial institutions.

Thomas Haider served as MoneyGram International’s chief compliance officer from 2003 until 2008, supervising the company’s fraud and AML compliance departments.

Haider was accused of failing to ensure compliance with AML and Bank Secrecy Act (BSA) laws during his career with the money transfer company, and last week settled the claims by paying a $250,000 penalty.

“I think it may have a chilling effect on qualified people taking the job,” said Donna More, a partner at Fox Rothschild in Chicago, of the impact on the ability of casinos and other groups to recruit AML compliance officers.

“Perhaps going forward they should be included in the D&O (Directors & Officers) insurance.”

Sharon Levin, a partner at WilmerHale in New York, said the Haider case serves as a warning to compliance officers that they face an increased risk of personal liability.

“In Haider, a court for the first time held that the Bank Secrecy Act permits the Treasury Department to sue individuals for an institution’s AML compliance failures,” Levin told GamblingCompliance.

“By reaching a settlement, that decision cannot be challenged on appeal,” she said. “But the Haider decision is unlikely to be the last word on this question.”

Levin’s advice: “Compliance officers should understand what insurance coverage they have, specifically whether their legal fees will be covered.”

On top of the $250,000 fine, Haider agreed as part of the settlement with prosecutors in Manhattan to accept a three-year ban on acting as a compliance employee at any money transfer company.

The Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury, which announced the civil action against Haider on December 18, 2014, had originally sought a $1m fine.

Although the Haider case does not involve casinos, it comes amid a period of intense scrutiny of the gaming industry’s AML practices on the part of FinCEN.

Casinos, just like banks and money transmitters such as MoneyGram, are considered a form of financial institution subject to the reporting and other compliance requirements established by the BSA.

Jennifer Roberts, an adjunct professor at the University of Nevada, Las Vegas’ William S. Boyd School of Law, said the penalty against an “individual compliance officer is something that should certainly be noticed.”

“However, the Haider case involved numerous ‘willful’ violations and several significant lapses in compliance,” Roberts said.

As part of the settlement, Haider accepted responsibility for failing to terminate contracts with specific MoneyGram outlets after receiving information that indicated the outlets were complicit in consumer fraud schemes.

According to a 50-page complaint, Haider also accepted responsibility for structuring MoneyGram’s AML program so that fraud reports about outlets were not generally provided to analysts who were responsible for filing suspicious activity reports to the government.

In a statement emailed to GamblingCompliance by one of his attorneys, Ian Comisky of Fox Rothschild in Philadelphia, Haider defended his work at MoneyGram despite the settlement.

The settlement also resolves Haider’s “separate claims against the Treasury Department based upon illegal media leaks that occurred in 2014, which were intended to … damage Haider’s reputation,” the statement said.

As for the gaming industry, Roberts said that many companies already have robust compliance programs in place because there has always been a risk of disciplinary actions by state regulators for major compliance failures.

“Not to mention, [AML] compliance officers have had the opportunity to enhance programs because of more recent FinCEN enforcement against the gaming industry,” Roberts said. “In the Haider case, you are talking about violations that occurred almost ten years ago.”

Levin said that regulators have tried to hold individuals responsible for corporate wrongdoing.

“AML is no different,” Levin said. “Regulators are showing a sustained interest in holding AML compliance officers personally liable for the institution’s AML deficiencies. This trend is likely to continue.”

Recent FinCEN enforcement actions have targeted various gaming companies, including CG Technology, California’s Hawaii Gardens and Oaks Club card rooms, Caesars Entertainment and the Trump Taj Mahal in Atlantic City.

FinCEN has also fined and barred a casino executive in the Northern Mariana Islands, although the individual in question was responsible for marketing programs involving high-rollers and was not an AML compliance officer.

Under the BSA, casinos and card clubs are expected to report all transactions worth more than $10,000, in addition to any others that could appear to be suspicious.

Federal regulators also expect casinos and other financial entities to demonstrate a so-called “culture of compliance.”

Levin said effective AML starts at the top.

“An AML officer must have strong independent authority and the support of the institution’s leadership,” Levin said. “This settlement only reinforces the importance of the support of company executives.”

The American Gaming Association (AGA) in 2014 published the casino industry’s first set of best practices for AML compliance.

Elizabeth Cronan, senior director of gaming policy at the AGA, said that individual compliance officers play a critical role on a daily basis.

“Compliance officers are essential to the industry’s strong culture of compliance,” Cronan told GamblingCompliance in an email.

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