CCOs On The Hook: FinCEN Seeking Fine Against Moneygram CCO

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moneygram5Chief Compliance Officers should take notice – the Treasury Department’s Financial Crimes Enforcement Network is proposing to fine Moneygram’s Chief Compliance Officer for Moneygram’s failure to police transactions for illicit activity.  The CCO faces a potential fine of up to $5 million.

A potential fine against a CCO who played a role in Moneygram’s anti-money laundering failures would be unprecedented but may be justified in this specific situation.

The CCO left Moneygram in 2008 after 16 years with the company.  In 2008, the CCO received $1.8 million in total compensation, most of which came from a severance package.

In November 2012, Moneygram forfeited $100 million and entered into a Deferred Prosecution Agreement.  Between 2003 and 2009, Moneygram processed thousands of transactions for its own agents who regularly tricked victims into wiring money by posing as relatives or promising cash prizes.

In response to thousands of complaints by customers who were victimized by Moneygram’s agents, Moneygram failed to stop the fraud, terminate the agents or remedy the situation.  Moneygram also violated the Bank Secrecy Act by failing to report the fraud activity.

FinCEN is led by Jennifer Shasky, the former Chief of the Justice Department’s Asset Forfeiture and Money Laundering Section.  She is very familiar with the facts of the Moneygram case and is committed to increasing FinCEN’s enforcement profile.

Congress has been pressuring the Treasury Department to step up its enforcement activities against individual board members, senior executives and other individuals tied to illicit financial activities.moneygram2

The proposed enforcement action will send an important message to the compliance community in the financial industry.  A CCO has to act when it is aware of misconduct.  The CCO cannot sit idly by and let violations occur, even when trying to implement important compliance reforms.

We do not know the precise facts of the CCO’s role in the Moneygram case, but the facts known to the public paint a pretty ugly picture.

For years, Moneygram’s fraud division accumulated thousands of consumer complaints and repeatedly notified senior management of the problem and recommended terminating agents engaged in fraud.  Despite the abundance of data and evidence indicating ongoing fraud, senior management repeatedly rejected or ignored the fraud division’s information and warnings.

It was only after the issuance of an FTC Civil Investigative Demand that senior management started to respond to the fraud division information.  The picture painted of senior management, which included the CCO, is particularly damning.

moneygram4As part of the DPA, Moneygram replaced the entire senior management team with new senior managers.  The CCO left the company in 2008, shortly before the matter came under government scrutiny.

If the CCO played a role in fostering or ignoring this blatant fraudulent scheme, the government is certainly justified in pursuing the CCO, and hopefully other top management with a direct link to this behavior.  The compliance profession should take heed – just like any profession, not everyone is an ethical and law-abiding person.  Even CCOs can engage in misconduct.  Let’s hope that there are not many others.

Topics:  Chief Compliance Officers, Enforcement Actions, FinCEN, Moneygram

Published In: General Business Updates, Criminal Law Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

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Michael Volkov
The Volkov Law Group

The Volkov Law Group specializes in white collar defense, corporate compliance, internal... View Profile »


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