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Individual accountability for an insufficient AML Program: Could your credit union’s AML compliance officer be at risk?

By Naomi Glass, BSA/AML/OFAC Compliance Manager

August 22, 2017 -- AML compliance officers are under a lot of pressure each day. They are tasked with ensuring that their financial institution’s AML program is meeting all regulatory obligations, which, truth be told, is no easy feat. Compounding these pressures is the threat of individual accountability in BSA/AML enforcement, meaning that if the ship were to go down, the AML compliance officer could be going down with it—personally.

Don’t miss out on staying BSA/AML and OFAC compliant! Registration deadline is 9/1/17.

There’s limited time left to sign up for our annual BSA/AML and OFAC on-demand training webinar. As a reminder, this webinar includes:

  • Six hours of educational content tailored to credit unions and presented by Mark W. Dever, AAP, CAMS, and senior consultant at Professional Bank Services
  • Fulfillment of the annual FFIEC training standard for BSA/AML compliance
  • A Corporate One certificate of attendance upon full completion

The webinar may be viewed through December 31, 2017.

Depending on the severity of a financial institution’s AML program inadequacies, AML compliance officers could be held accountable, either criminally or civilly. According to Peter D. Hardy and Jessica C. Watt of Ballard Spahr LLP, the circumstances that may increase the chances of an enforcement action against an individual are quite similar to the circumstances that can increase the chances of enforcement against a company. These circumstances include the following:

  • AML program failures involve systemic breakdowns
  • Issues that continued unabated for substantial periods of time
  • Red flags are consistently ignored
  • The facts demonstrate significant customer/member harm
  • Access to the financial institution is allowed to those engaged in criminal activity

Conversely, individual AML compliance officers can take certain steps, which may reduce risk:

  • Ensuring the AML program is properly tailored and implemented
  • Assessing the institution’s culture of compliance, which starts at the top
  • Ensuring effective training
  • Not allowing situations to become overwhelming for the individuals involved
  • Documenting situations and escalating matters up through the leadership chain when appropriate
  • Raising internal awareness of the external regulatory environment
  • Maintaining good communications with regulators

Holding AML compliance officers personally liable for their employer’s AML program deficiencies is garnering a lot of widespread attention. In fact, AML industry conferences that cover this topic tend to draw large crowds. Those who work in the industry follow enforcement cases closely. One of the more widely-known and groundbreaking cases is the U.S. Department of the Treasury v. Thomas E. Haider. Mr. Haider’s is a cautionary tale:

  • Mr. Haider served as chief compliance officer for MoneyGram International Inc. from 2003 to 2008. In that role, Mr. Haider was responsible for ensuring that MoneyGram complied with the BSA, which is designed to protect the financial system from being exploited by money launderers and terrorist financers.
  • In December 2014, the Financial Crimes Enforcement Network (FinCEN) assessed a $1 million civil monetary penalty against Mr. Haider based on his willful failure to ensure that Moneygram (1) implemented and maintained an effective AML program, and (2) filed timely suspicious activity reports (SARs).
  • Ultimately, the case was settled in May 2017. Mr. Haider agreed to a three-year injunction, barring him from performing a compliance function for any money transmitter and to pay a $250,000 penalty. Although this was a reduced fine, it is still one of the largest fines ever imposed by FinCEN on an individual.
    • In FinCEN’s announcement of the settlement, acting FinCEN Director Jamal El-Hindi provided the following statement which stresses the importance of the work that is being performed by compliance professionals:

      “FinCEN relies on compliance professionals from every corner of the financial industry. FinCEN and our law enforcement partners need their judgment and their skills to effectively fight money laundering, fraud, and terrorist financing. Compliance professionals occupy unique positions of trust in our financial system. When that trust is broken, it is important that we take action so that the reputations of thousands of talented compliance officers are not diminished by any one individual’s outlying egregious actions.”

In closing, AML compliance officers should be mindful that there could be civil or criminal penalties personally imposed against them for failing to keep their financial institution’s AML program compliant with the BSA. Yes, this adds an extra layer of pressure associated with the job; however, it shouldn’t be an issue as long as the regulators are satisfied that the AML compliance officer is continually steering the boat in the right direction.