A Money Laundering Nightmare: Western Union Ponies Up $770 Million to Settle with DOJ, FTC and FinCEN
Earlier this year, in January 2017, Western Union entered into a Deferred Prosecution Agreement with the Justice Department and the FTC, and agreed to pay $586 in forfeiture to settle anti-money laundering and consumer fraud violations. At the same time, Western Union agreed to pay $184 million in civil monetary penalties for AML violations.
The Western Union prosecution sends an important reminder to financial institutions, traditional banks and non-traditional money service businesses, casinos, and paycheck businesses, that facilitating criminal activity through financial services creates significant risks for the financial operator. To protect against an enforcement action or regulatory scrutiny, financial institutions need to embrace robust compliance programs that do not fall by the wayside when the business seeks to earn significant revenues from questionable activities.
Western Union protected high-volume independent agents from scrutiny while knowing that these agents were structuring financial transactions in order to evade regulatory scrutiny and facilitate illegal activity.
Western Union’s corporate culture embraced these schemes and failed to provide any checks against independent agents who engaged in suspicious activities. As a result, Western Union engaged in hundreds of millions of dollars worth of transactions that were connected to illegal activity.
In one significant scheme, fraudsters contacted US victims and posed as family members in need or promised prizes or job opportunities. The fraudsters requested that victims send money through Western Union, and specific agents were enlisted as part of the schemes in return for a cut of the fraud proceeds.
Surprisingly, Western Union knew about these fraud schemes but failed to take corrective action. Western Union received numerous customer complaints but failed to take meaningful action against these agents.
To make matters worse, Western Union acquired agents that Western Union knew prior to the acquisition had an ineffective AML program and was engaged in consumer fraud. Western union moved forward with the acquisition and took no action to remediate or terminate the high-fraud agents.
Western union also turned a blind eye to significant numbers of transactions in California and Pennsylvania conducted by agents who structured transactions to avoid filing of CTRs. Instead of correcting these activities, Western Union continued to permit such evasion in order to continue earn significant revenues.
Western union agreed to a two-count information charging criminal AML and consumer fraud violations. As part of the DPA, Western Union agreed to implement a robust compliance program to prevent lapses in compliance by its agents, ensures that all of its agents will adhere to US regulatory and AML standards, and ensures that the company will report suspicious or illegal activity. Western Union agreed to a separate settlement and order with the FTC.
Western Union agreed to the appointment of a monitor for a three-year period to oversee the compliance and remediation program.
The Justice Department’s settlement with Western Union came on the heels of separate guilty pleas from three agents for BSA violations. As part of this ongoing investigation, 26 agents and employees previously plead guilty to fraud violations.