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Exclusive: U.S. anti-money laundering authority faces hiring probe - sources

Director of the Treasury Department's Financial Crimes Enforcement Network Jennifer Shasky Calvery speaks to media announces two felony char
Director of the Treasury Department's Financial Crimes Enforcement Network Jennifer Shasky Calvery speaks to media announces two felony char

By Emily Flitter and Brett Wolf

NEW YORK/ST LOUIS (Reuters) - The U.S. Treasury Department temporarily froze all recruitment by its anti-money laundering arm and forced the agency to rescind 11 job offers, after an investigation found it violated the federal employment code during an aggressive hiring push, according to several government officials.

The Office of Personnel Management, a federal agency that governs labor practices in the government, determined that the Treasury's Financial Crimes Enforcement Network, known as FinCEN, illegally screened candidates in a quest to hire only lawyers for certain jobs, the officials said. It has recommended further investigations by two other federal agencies into FinCEN's practices, they added.

Rules for hiring at government agencies make it illegal to screen candidates for qualifications that aren't stipulated in the job description, and the jobs FinCEN had posted weren't designated as being only for lawyers, the officials said.

Some senior Treasury officials knew about FinCEN's practice but it was not halted until OPM identified the problem, two of the sources said. Treasury sent a memo to FinCEN suspending its hiring authority, one of the sources said.

A Treasury spokeswoman, ​Hagar Chemali, said on Thursday that FinCEN is "committed to complying with all relevant federal rules and regulations regarding federal hiring."

On Friday, she said, "FinCEN does not have a hiring freeze. It is continuing to recruit and hire."

Chemali declined to comment on the memo or provide further explanation.

It was not clear when the hiring freeze first came in and when it was lifted. The agency now has three jobs posted on its website, with one listed as opening for applications on May 1 and one on May 2.

OPM did not return calls and emails seeking comment.

The temporary hiring freeze at FinCEN, the rescinding of job offers, and further investigations into its practices could deal at least a short-term setback to its push to aggressively crack down on money laundering.

ACAMS moneylaundering.com, a compliance trade publication, previously reported that FinCEN was under scrutiny and that Treasury officials were considering suspending its hiring authority. However, the actual hiring freeze, the rescinded job offers, the investigations, and why OPM intervened have not been previously reported.

REMAKING AGENCY

The hires were being done as part of a drive by FinCEN's director, Jennifer Shasky Calvery, to remake her agency, the formerly sleepy steward of U.S. anti-money laundering laws, into a powerful organization capable of standing up to big banks and other financial firms where violations are discovered.

FinCEN has taken part in several of the highest-profile actions against banks over the past three years, including a record $875 million settlement with HSBC Holdings Plc for helping Mexican drug traffickers launder money in U.S. accounts. Earlier this year, the agency also participated in an investigation into JPMorgan Chase & Co. That probe resulted in the bank agreeing to $1.9 billion in penalties and forfeitures for failing to alert regulators to suspicions about convicted Ponzi schemer Bernard Madoff.

FinCEN can issue civil penalties but lacks prosecutorial power.

The positions at FinCEN where the illegal hiring took place were in the agency's recently revamped enforcement division, according to the officials. One of the officials said several of the people whose job offers were revoked are currently prosecutors at the U.S. Department of Justice, where Shasky served as the chief of the DOJ's Asset Forfeiture and Money Laundering Section before moving to FinCEN in September 2012.

It is unclear whether any of the people who had job offers revoked suffered damage to their careers as a result.

At an ACAMS conference in March, Shasky talked about her hiring strategy.

"We needed people that understood, 'How do you do enforcement? How do you issue a summons? How do you do a deposition? How do you negotiate a settlement? How do you draft the charging documents?' Just kind of the nuts and bolts of doing enforcement," she said.

FinCEN ranked 296 of 300 in the 2013 list of the best places to work in the federal government, according to the non-profit Partnership for Public Service, based on data collected by OPM in an employee survey. The agency scored low on categories such as effective leadership, teamwork and employee skills-mission match. In 2012, FinCEN was ranked 147 out of 292.

INFLEXIBLE SYSTEM

Federal employment experts said the incident highlights the antiquated system that dictates hiring procedures inside the federal government, making the task of recruiting new government employees far more complicated and cumbersome than it is in the private sector.

Debra D'Agostino, a founding partner of the Federal Practice Group, which specializes in labor laws for government employees, said hiring managers at government agencies frequently have more specific requirements in mind than they are permitted to display in some job postings. Most find a way around the problem without leaving a paper trail, she said.

"It happens all the time," D'Agostino said. "In this case it looks like they just took the extraordinary step of tinkering with things when there was no reason to do that and now they have to suffer the consequences."

Linda Rix, who is co-chief executive of the consulting firm Avue and who worked early in her career in OPM's audits department, said the rules need to be revamped.

"They're a bunch of Byzantine rules that the government has that a normal layperson looking at this says, 'I can see why they would want someone with this skill,' but that is contrary to how the government operates," she said.

A recent memo from the Obama Administration concerning the 2015 budget called for a congressionally chartered commission to examine the federal personnel system and recommend reform.

'COMPLEX LITIGATION EXPERIENCE'

The FinCEN ads for the jobs in question didn't say explicitly that only lawyers could apply.

But the people at FinCEN in charge of hiring devised a system to weed out candidates who weren't lawyers by asking whether they had "complex litigation experience," something only a lawyer could claim to have, according to one of the sources.

It could not be determined why FinCEN could not get permission to classify the jobs as open only to lawyers.

OPM discovered the practice during a routine audit. As a result, the job offers for the 11 lawyers were rescinded earlier this year, the officials said.

OPM also recommended that Treasury refer the incident to the department's Inspector General and to the Office of Special Counsel, an independent agency tasked with protecting whistleblowers and disciplining government employees for labor misconduct, for investigation, they said.

A spokesman for the Office of the Special Counsel declined to comment for this story.

"We can neither confirm nor deny the existence of investigations," said Richard Delmar, a spokesman for the Treasury's inspector general.

(Reporting By Emily Flitter in New York and Brett Wolf in St Louis; Additional reporting by Mark Hosenball in Washington; Edited by Martin Howell)

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