Global payment services provider Western Union will pay $586 million to the US federal government for failing to stop its agents who used its platform for fraud as well as money laundering purposes.
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The company said late on Thursday that it reached agreements with the US Department of Justice (DOJ) and Federal Trade Commission (FTC) over their investigation into Western Union's oversight of certain agents involved in money laundering mainly between 2004 and 2012.
The penalty amount will be used to reimburse consumers who were victims of fraud during the relevant period. Simultaneously, Western Union has also been asked to take specific actions to further enhance its oversight of agents and its protection of customers. Those actions will be reviewed by an independent compliance auditor for three years.
"Our investigation uncovered hundreds of millions of dollars being sent to China in structured transactions designed to avoid the reporting requirements of the Bank Secrecy Act, and much of the money was sent to China by illegal immigrants to pay their human smugglers," US Attorney Decker said.
During the last five years, Colorado Western Union has increased overall compliance funding by more than 200 percent and now the company spends approximately $200 million per year on compliance, with more than 20 percent of its workforce currently dedicated to compliance functions.
In addition, the payment services provider will resolve, without any additional payment or non-monetary obligations, potential claims by the US Treasury Department's Financial Crimes Enforcement Network (FinCEN) relating to Western Union's conduct between 2010 and 2012
that FinCEN says violated the Bank Secrecy Act. The company received a notice of investigation from FinCEN in mid-December 2016. The separate agreement with FinCEN sets forth a civil penalty of $184 million, the full amount of which will be deemed satisfied by the $586 million compensation payment under the DOJ and FTC agreements.
On account of these penalties, Western Union expects to take a charge of approximately $570 million in its 2016 fourth quarter earnings. Excluding the fourth-quarter charge, the company anticipates reporting 2016 financial results in line with its financial outlook provided in November last year. Western Union will report its full fourth-quarter results on February 9, 2017.
