Western Union Pays $60 Million Fine to Settle New York Claims of Lax Fraud Controls

The Western Union Co. and the New York Department of Financial Services announced Thursday that the wire-transfer market leader will pay a $60 million fine to settle alleged violations of the state’s anti-money-laundering laws, including transactions that supported human trafficking from China.

New York authorities alleged that between 2004 and 2012, the company failed to implement money-laundering controls and looked the other way as some of its most profitable agents generated suspicious transactions. In particular, the state zeroed in on transactions originated by three agent locations in New York City that, despite their small size, generated $2.9 billion in volume, much of it going to China. In 2008, Western Union paid the owner of one of those locations, in Lower Manhattan, a $250,000 bonus to renew his contract despite numerous compliance violations, the DFS said in a news release.

“The owner of the Lower Manhattan location later admitted to law-enforcement agents that he knew that at least some customers used Western Union’s money-transfer services to pay debts to human traffickers based in China, and structured transactions to avoid identification and reporting requirements and thus evade scrutiny,” the release says.

The New York settlement is one more component of a wider investigation by federal authorities and attorneys general in 49 states into third-party fraud conducted through Western Union money-transfer services. That investigation resulted in a deferred prosecution agreement last year that called for Western Union to pay $586 million to the U.S. Department of Justice to compensate fraud victims, and $5 million to the states to cover their investigation costs, according to a Western Union regulatory filing. The company also agreed to ramp up its agent oversight and anti-fraud efforts.

In a statement, Western Union said the New York DFS has acknowledged that the company “has undertaken significant remedial measures, and implemented compliance enhancements, to improve its anti-fraud and anti-money-laundering programs.”

Western Union said it has increased its overall compliance spending by more than 200% over the past six years, and now spends more than $200 million annually on compliance, with 20% of its work force now devoted to compliance tasks.

“Over the last six years, the dollar value of reported fraud in consumer-to-consumer transactions, compared with the total value of all such transactions, has dropped more than 60%,” the company said.