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Western Union Will Pay $586 Million to Settle Feds’ Claims of Lax Anti-Fraud Controls
January 19, 2017

By Jim Daly

The Western Union Co. will pay $586 million to the federal government to reimburse consumers victimized by fraud as a result of the company’s allegedly lax supervision of agents and anti-fraud and money-laundering controls. The settlements announced Thursday are a result of investigations that covered payments involving the smuggling of illegal Chinese immigrants, marketing scams, and drug trafficking on the U.S.-Mexico border.

As part of the settlements, the wire-transfer company entered into a deferred prosecution agreement with the U.S. Department of Justice and a consent order with the Federal Trade Commission. Western Union admitted to criminal violations, including willfully failing to maintain an effective anti-money-laundering (AML) program and aiding and abetting wire fraud, the FTC said in a news release.

In addition, Western Union, which has approximately 500,000 agent locations in 200 countries, must take specific measures to enhance its procedures for overseeing agents and protecting customers, procedures which will be monitored by an independent auditor for three years.

A separate agreement with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCen) imposes a $184 million civil penalty on Western Union, but that penalty will be deemed satisfied with payment of the $586 million under the DoJ and FTC agreements, Englewood, Colo.-based Western Union said in a statement.

The FTC/DoJ investigations involved U.S. Attorney’s offices in Pennsylvania, Florida, and California. Most of the misconduct in question occurred between 2004 and 2012 and involved Western Union agents and other third parties. Western Union had previously disclosed investigations, which covered complaints ranging from agents helping international fraudsters carry out mass-marketing scams to “hundreds of millions of dollars being sent to China” in ways designed to avoid reporting requirements set by federal law. Some of the payments were sent by illegal immigrants to pay smugglers, according to the FTC. In several cases, Western Union reportedly tried to protect high-volume agents involved in suspect activities, authorities said.

The FinCen settlement resulted from an investigation of activities that occurred from 2010 to 2012. According to FinCen, Western Union used so-called master agents along the U.S.-Mexican border who in turned used subagents, some of whom sent proceeds from illicit drug sales to Mexico.

“Despite its knowledge of the money-laundering risks and the use of remittances to send narcotics proceeds to Mexico, [Western Union] failed to collect sufficient information on the identity of its Mexican-based subagents,” FinCen said in a news release. “This prevented [Western Union] from monitoring these agents to ensure that they were properly identifying the person obtaining money in Mexico.”

Western Union said that it now spends about $200 million per year on regulatory compliance and over the past five years has increased its overall compliance funding by more than 200%. The company also said more than 20% of its workforce is dedicated to compliance, and that its fraud rate on consumer-to-consumer transactions is down by 60%.

“We share the government’s goal of protecting consumers and the integrity of our global money-transfer network, and we worked hard to resolve these matters with the government,” Western Union said. “We are committed to enhancing our compliance programs to prevent illicit activity on our network and protect customers who transfer money to friends, family, and businesses.”

The company said it anticipates taking a $570 million pre-tax charge in its fourth-quarter 2016 financials to cover the settlements and related expenses.

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