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Financial Services Law Insights and Observations

District Court Denies Motion to Dismiss, Rules Compliance Officers Responsible for AML Program Failures

Financial Crimes Anti-Money Laundering Bank Secrecy Act Courts FinCEN

Financial Crimes

On January 8, the U.S. District Court of Minnesota ruled that individual officers of financial institutions may be held responsible for ensuring compliance with anti-money laundering laws under the Bank Secrecy Act (BSA). U.S. Dep’t of Treasury v. Haider, No. 15-cv-01518, WL 107940 (Dist. Ct. Minn. Jan. 8, 2016). In May 2015, the defendant filed a motion to dismiss the U.S. Department of the Treasury’s December 2014 complaint against him. The Treasury’s complaint alleged that the defendant failed in his responsibility as the Chief Compliance Officer for an international money transfer company to ensure that “the Company implemented and maintained an effective AML program and complied with its SAR-filing obligations.” The complaint sought a $1 million judgment against the defendant and enjoined him from working for, either directly or indirectly, any “financial institution” as defined in the BSA. In his motion to dismiss, the defendant contended that the Treasury’s complaint should be dismissed because, among other reasons, 31 U.S.C. § 5318(a) permits the imposition of a penalty for AML program failures against an entity, not an individual. However, the District Court of Minnesota dismissed the motion, ruling that the BSA’s more general civil penalty provision, § 5321(a)(1), could subject a partner, director, officer, or employee of a domestic financial institution to civil penalties for violations “of any provision of the BSA or its regulations, excluding the specifically excepted provisions.” Judge David Doty further opined, “Because § 5318(h) is not listed as one of those exceptions, the plain language of the statute provides that a civil penalty may be imposed on corporate officers and employees like [the defendant], who was responsible for designing and overseeing [the company's] AML program.” The defendant also challenged the Treasury’s complaint on the bases that (i) the request for injunctive relief was time barred by the applicable statute of limitations; (ii) FinCEN should not have been permitted to receive and publicly use grand jury information; and (iii) FinCEN violated his due process rights. For various reasons, the District Court declined to decide on such issues or to dismiss materials based on the arguments presented.

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