Treasury Department Settles Claim Against Former Chief Compliance Officer of Money Transmitter

In an announcement that highlights the importance of proper compliance management in the areas of financial fraud and anti-money laundering programs, the U.S. Attorney for the Southern District of New York and the Acting Director of the Financial Crimes Enforcement Network (“FinCen”) announced on May 4 that the Treasury Department settled its claims under the Bank Secrecy Act against the former Chief Compliance Officer of a large money transmitter (“former CCO”) for his failure to implement policies to detect and terminate agents and outlets who presented a high risk of fraud.  The former CCO agreed to pay $250,000, and he cannot perform a compliance function for any money transmitter located in the United States for a period of three years.

The former CCO admitted, acknowledged, and accepted responsibility for, among other things, (1) failing to implement proposed policies for terminating or otherwise disciplining agents and outlets that presented a high risk of fraud; (2) failing to terminate 49 money transmitter outlets in Canada whom accounted for 58% of all reported fraud involving money sent through the money transmitter; (3) allowing an individual to open more money transmitter locations even though his already-existing four outlets collectively accumulated 450 Consumer Fraud Reports, totaling more than $790,000 in consumer losses; and (4) structuring the money transmitter’s anti-money laundering program in a way that information aggregated by the fraud department was not generally provided to the analysts who were responsible for filing suspicious activity reports with FinCen.

This settlement concludes actions brought by FinCen and the U.S. Attorney’s Office for the Southern District of New York which included a $1 million civil money penalty and a complaint to enjoin the former CCO from employment in the financial industry.  Further, it concludes the former CCO’s counterclaim against the Treasury Department for alleged violations of his rights under the Privacy Act of 1974 that purportedly occurred during the investigation.

The entire settlement agreement can be found here: https://www.justice.gov/usao-sdny/press-release/file/963816/download.