This was a banner week in AML enforcement for the US Attorney’s Office for the Southern District of New York. First, the SDNY, on behalf of FinCEN, announced it has filed an enforcement action against Thomas Haider, the former Chief Compliance Officer of Moneygram International. The SDNY complaint alleges, among other things, that because of Haider’s actions and inactions, perpetrators of fraud and money laundering were allowed to use Moneygram’s services to facilitate their illegal schemes. The complaint seeks to enforce a $1M civil money penalty previously levied against Haider by FinCEN and to enjoin Haider from future work in the financial services industry. FinCEN’s individual targeting of the Chief Compliance Officer of not just any money services business, but of one of the world’s largest such businesses, is a further indication of FinCEN’s increasingly aggressive enforcement posture.
Also this week, Judge Jed Rakoff of the SDNY sentenced well-known Bitcoin entrepreneur Charlie Shrem to two years in federal prison, to be followed by three years of supervised release. The Government had asked Judge Rakoff to impose the term recommended by the U.S. Sentencing Guidelines of 57 months’ imprisonment. Shrem’s lawyers had asked for a “non-incarceratory” sentence of probation. Insisting on a sentence of prison, SDNY prosecutors specifically addressed the virtual currency industry and the need for legal compliance within it. Consistent with its prior pronouncements on digital currency, prosecutors’ sentencing submission said that “that Bitcoin has legitimate uses.” But they insisted Shrem deserved prison time in part because a prison sentence would “send a clear message to other digital currency exchange businesses that flouting AML rules comes with consequences.” “Unless Shrem receives serious punishment,” concluded the Government, “many in the digital currency industry will draw the conclusion that the AML laws need not be taken seriously.”