Waves of financial crash nostalgia are sweeping over us as fears of a repeat of the 2008 crisis send shockwaves through markets.
Oscar hopeful “The Big Short” has hit cinemas, gently reminding us that some actually profited from the bubble which threatened to collapse major institutions until governments bailed them out.
Inside an altogether different bubble, those tasked with helping stave off disaster met at the Davos 2016 World Economic Forum recently to discuss what could be done to prevent a reoccurrence.
Rubbing shoulders with celebrities, the world’s great and good decided that blockchains, ledger technology, can help us take that next financial evolutionary step as nervous glances were cast at oil process and share index value.
Much hot air has been expended arguing over the “whys” and “what ifs”, but despite the festering public resentment over the fact, there has been little talk of punishment for wrongdoing.
There were famously no US or European prosecutions in the wake of the 2008 meltdown, no accountability, and a bemusement that despite a spectacular and unprecedented mishandling, it turned out no one was to blame.
One man who may have a view on where the buck stops, but whom we are unlikely to hear from for some time, is the former chief compliance officer for global money remitted MoneyGram, Tom Haider.
While politicians, actors, activists and economists quaffed Dom Perignon at the Swiss retreat and heralded the rise of automated technology in financial services, Haider had more immediate concerns to attend to.
He is being prosecuted by the US Treasury, and is the first person to contest Bank Secrecy Act charges.
In January, his argument to have the case thrown out was denied and it will now proceed to federal trial.
The Financial Crimes Enforcement Network (FinCEN) is seeking a $1m penalty against Haider, who is accused of overseeing significant money laundering failings during his time at the money transfer company.
He is accused of failing to maintain an adequate compliance program and file timely suspicious activity reports.
Haider, protesting innocence, believes the company itself, which agreed to a $100m penalty following admission it violated anti-money laundering laws, should be held fully to account given his attempts to flag problems.
Despite little public fanfare of it, the financial crash did create a new type of regulator in its wake; aggressive and driven by a public desire to see someone, anyone, culpable for a major financial error.
The “high risk, high reward” compliance profession saw salaries top $1m a year in some cases, but with a heavy load that they bear individual liability for company-wide failings.
In January 2013, Humberto Sanchez, the compliance officer of a money services business in Los Angeles, was handed an eight-month prison sentence after pleading guilty to failing to have an effective AML programme in place, in violation of the Bank Secrecy Act.
In 2014, the Office of the US Attorney in Manhattan charged Charlie Shrem, chief compliance officer of Bitcoin company BitInstant, with money laundering conspiracy as part of the notorious Silk Road online drug marketplace case.
In July 2013, James Green, the chief compliance officer of foreign currency trading firm FX Direct Dealer, was hit with a $75,000 penalty by the National Futures Association (NFA), the self-regulatory organization of the US futures industry.
Legal experts believe those in the payments sector are in a particularly perilous position, as enforcers such as the Consumer Financial Protection Bureau (CFPB) target companies which process fraudulent payments despite proof that the company itself has been defrauded.
Michael Zeldin, special counsel in BuckleySandler’s Washington, D.C. office and a principal in the firm’s financial crimes practice, told me he was concerned 2016 could be the year of individual liability.
“Compliance for global organizations, especially for companies that rely on agents, branches, affiliates all over the world, is a very challenging undertaking,” he said.
“Regulators and prosecutors need to understand just how difficult it is.
“If we find ourselves in an environment where the government believes that someone always must be left standing when the music stops, that worries me greatly.”
Given that financial compliance officers are often at the mercy of budget constraints, it may result in senior management being drawn into compliance rows if officials look further up the chain for a culprit.
The need to be seen to be aggressive is always most pressing following high-profile cases, but while the global economy teeters again, it is perhaps time to show a little more caution.
Haider’s case throws up an interesting puzzle, as in MoneyGram’s admission it includes detail that his calls to flag up a number of fraudulent transactions was overruled by internal officers.
It is unlikely that there will be a Hollywood movie made about Haider’s fate, but it is a tale everyone should be aware of as it may ultimately turn away talented individuals at a time when the fintech space needs them the most.
Compliance officers in the payments space will be hoping it does not turn into a horror story.
News Editor, PaymentsCompliance