Western Union agreed to pay USD.586 million for aiding wire fraud and anti-laundering lapses

Western Union Co, the world's biggest money-transfer company, agreed to pay $586 million and admitted to turning a blind eye as criminals used its service for money laundering and fraud, U.S. authorities said on Thursday.

Western Union, which has over half a million locations in more than 200 countries, admitted "to aiding and abetting wire fraud" by allowing scammers to process transactions, even when the company realized its agents were helping them avoid detection, the U.S. Department of Justice and the Federal Trade Commission said in statements.

With the help of Western Union agents, Chinese immigrants used the service to send hundreds of millions of dollars to pay human smugglers, wiring the money in smaller increments to avoid federal reporting requirements, U.S. authorities said.

Fraudsters offering fake prizes and job opportunities swindled tens of thousands of U.S. consumers, giving Western Union agents a cut in return for processing the payments, authorities said.

Between 2004 and 2012, the Colorado-based company knew of fraudulent transactions but failed to take steps that would have resulted in disciplining of 2,000 agents, authorities said.

"This consent agreement with Western Union reflects that company's recognition of past shortcomings and the damage that can be done when there is a failure of a culture of compliance," said Jamal El-Hindi, acting director of the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN).

Western Union failed to conduct adequate due diligence, including background checks and on-site reviews, on a number of new agents and failed to conduct enhanced due diligence on certain high-risk Latin America-based agents, FinCEN said in a press release.

The company also failed to properly and timely report suspicious activity linked to agents, FinCEN said.

A Western Union spokesman said that the company is committed to "vigorously protecting" its customers.

"We acknowledge that in certain instances in the 2004 to 2012 period of time the company did not do as much as it should have with respect to agent oversight. We are committed to carrying out the oversight with the zeal and the speed required by the hundreds of millions of transactions we process globally," Bill Chandler, chief communications officer for Western Union, told Thomson Reuters Regulatory Intelligence.

Western Union, which helped clients move over $150 billion in 2015, said in a press release that more than one-fifth of its work force is currently devoted to compliance. It added that during the past five years, the company has increased compliance funding by more than 200 percent and now spends about $200 million per year. It also said consumer fraud accounts for less than one-tenth of 1 percent of consumer-to-consumer transactions.

The settlement includes refunds for customers who were victims of scams, authorities said. Western Union will also implement a comprehensive anti-fraud program to train agents to identify and stop transactions that result from fraud.

Between 2004 and 2015 Western Union collected 550,928 complaints about fraud, with 80 percent of them coming from the United States where it has some 50,000 locations, the government complaint said. The average consumer complaint was for $1,148, the government said.

Western Union reported revenues of $1.4 billion for the quarter that ended on September 30, 2016, according to a government filing.



 Source: Reuters