Western Union Admits to Money Laundering, Aiding and Abetting Wire Fraud

The company has agreed to pay $586 million in a settlement with Justice Department, others

Western Union Admits to Money Laundering, Aiding and Abetting Wire Fraud
Image: Pixabay
January 20, 2017

Western Union, the well-known global money services company often used to wire money, has admitted to breaking the law by engaging in money laundering and aiding and abetting wire fraud.

The Federal Trade Commission (FTC) reports that the company has agreed to pay $586 million in settlements with the FTC, the Justice Department, and the U.S. Attorneys' Offices of the Middle District of Pennsylvania, the Central District of California, the Eastern District of Pennsylvania, and the Southern District of Florida.

It was in its agreement with the Justice Department that Western Union admitted to the charges.

Western Union agreed to settle the FTC's charges that its conduct violated the FTC Act. The agency's complaint claim that fraudsters across the world have been using the company's money transfer system for many years and that Western Union not only knew about it, but that some of its agents have even been involved in fraud. The FTC claims that the company did not put effective anti-fraud policies and procedures into place and did not take immediate action against problem agents. Western Union has identified many such agents, but instead of promptly suspending and firing them, it profited by their actions.

In resolving the agency's charges, Western Union agreed to pay a monetary judgment of $586 million and to carry out and maintain a comprehensive anti-fraud program including the following: training for agents and their front-line associates, monitoring to identify and prevent transfers of money induced by fraud, due diligence on all new and renewing agents, and the suspension or firing of agents who do not comply.

The FTC's order prohibits the company from sending a money transfer that it knows, or reasonably should know, is induced by fraud and requires it to do the following:

  • Block all transfers of money sent to any person who is the subject of a fraud report
  • Place clear and conspicuous consumer fraud warnings on both its paper and its electronic forms for transferring money
  • Make websites and telephone numbers enabling consumers to file fraud complaints more available
  • Refund money transfers induced by fraud if Western Union did not comply with its own anti-fraud procedures in regard to that transaction

Also, in compliance with the Telemarketing Sales Rule, it must not process money transfers that it knows or should know are payment for telemarketing transactions. An independent compliance auditor will monitor the company's compliance with the order for three years.

Admissions in the deferred prosecution agreement with the Justice Department and the statement of facts that accompanies it show that Western Union broke U.S. laws, specifically the Bank Secrecy Act (BSA) and anti-fraud statutes, by processing hundreds of thousands of transactions for company agents as well as others who were involved in an international consumer fraud scheme.

As part of this scheme, scammers made contact with U.S. victims and either pretended to be family members in need or promised the victims prizes or job opportunities. They directed victims to transfer money using Western Union to help the relative or claim the prize. Some Western Union agents were involved in these schemes, often processing the fraud payments in return for part of the proceeds.

The company knew about its agents who were involved in or aided these transactions, but it did not take corrective action against them. Starting at least in 2004, it recorded customers' complaints regarding payments induced by fraud in documents known as consumer fraud reports. In that year, the company's Corporate Security Department proposed global guidelines for disciplining and suspending agents who processed a significantly high number of fraud transactions. In effect, the Department recommended the automatic suspension of any agent who paid 15 consumer fraud reports within 120 days. If Western Union had put these guidelines into effect, it would have prevented victims from suffering significant fraud losses, and more than 2,000 agents across the world would have experienced corrective action between 2004 and 2012.

Court documents also show that the company broke the BSA over eight years, failures that involved, among other factors, acquiring a significant agent who it knew beforehand had an ineffective anti-money laundering program and who had entered into contracts with other agents who were aiding significant amounts of consumer fraud. In spite of knowing all of this, Western Union went through with the acquisition, and it neither fixed the failures of the anti-money laundering program nor fired the high-fraud agents.

Similarly, the company did not fire or discipline agents who repeatedly broke the BSA and Western Union policy with their structuring activity in the Central District of California and the Eastern District of Pennsylvania. Financial institutions, including money services businesses like Western Union, are required by the BSA to file currency transaction reports for transactions made in currency greater than $10,000 in one day. In order to avoid filing these reports and complying with identification requirements, criminals often structure such transactions so that no one transaction will be higher than $10,000. Financial institutions have to report suspected structuring where the total number of transactions made by or on the behalf of any person total more than $10,000 during a single business day.

The company knew that certain U.S. agents were either allowing or aiding and abetting such structuring by customers. However, rather than take corrective action to get rid of structuring at and by its agents, it allowed those agents, among other things, to continue sending transactions through the company's system and paid them bonuses. In spite of repeated compliance reviews that identified suspicious or illegal agent behavior, the company almost never identified such suspicious activities in the reports it was required to make to law enforcement.

Finally, Western Union had been aware since at least December 1997 that people use its money transfer system to send illegal gambling transactions to offshore sportsbooks from Florida. It knew that such transactions had a higher risk of money laundering and that, through at least 2012, certain procedures that it carried out were ineffective at limiting transactions that had characteristics indicating illegal gaming from the U.S. to other countries.

The company entered into a deferred prosecution agreement connected with a two-count felony criminal information filed in the Middle District of Pennsylvania. This charged Western Union with willfully failing to maintain an effective anti-money laundering program and aiding and abetting wire fraud. The company has agreed to pay $586 million and to enhance compliance requirements to prevent the conduct in question from happening again, including developing policies and procedures:

  • For corrective actions against any agents posing an unacceptable risk of money laundering or who have shown systemic, willful, or repeated lapses in complying
  • That make sure that its agents across the globe will comply with U.S. regulatory and anti-money laundering standards
  • That make sure Western Union will report suspicious or illegal activity carried out by its agents or related to consumer fraud reports.

Since 2001, 29 owners or employees of Western Union agents have been charged and convicted for their roles in fraudulent and structured transactions.

Anyone who thinks they have been a victim of the fraud scheme should visit the Department of Justice's victim website to find out how to request compensation through the Victim Asset Recovery Program.