Western Union Will Pay $586 Million to Settle Feds’ Claims of Lax Anti-Fraud Controls

The Western Union Co. will pay $586 million to the federal government to reimburse consumers victimized by fraud as a result of the company’s allegedly lax supervision of agents and anti-fraud and money-laundering controls. The settlements announced Thursday are a result of investigations that covered payments involving the smuggling of illegal Chinese immigrants, marketing scams, and drug trafficking on the U.S.-Mexico border.

As part of the settlements, the wire-transfer company entered into a deferred prosecution agreement with the U.S. Department of Justice and a consent order with the Federal Trade Commission. Western Union admitted to criminal violations, including willfully failing to maintain an effective anti-money-laundering (AML) program and aiding and abetting wire fraud, the FTC said in a news release.

In addition, Western Union, which has approximately 500,000 agent locations in 200 countries, must take specific measures to enhance its procedures for overseeing agents and protecting customers, procedures which will be monitored by an independent auditor for three years.

A separate agreement with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCen) imposes a $184 million civil penalty on Western Union, but that penalty will be deemed satisfied with payment of the $586 million under the DoJ and FTC agreements, Englewood, Colo.-based Western Union said in a statement.

The FTC/DoJ investigations involved U.S. Attorney’s offices in Pennsylvania, Florida, and California. Most of the misconduct in question occurred between 2004 and 2012 and involved Western Union agents and other third parties. Western Union had previously disclosed investigations, which covered complaints ranging from agents helping international fraudsters carry out mass-marketing scams to “hundreds of millions of dollars being sent to China” in ways designed to avoid reporting requirements set by federal law. Some of the payments were sent by illegal immigrants to pay smugglers, according to the FTC. In several cases, Western Union reportedly tried to protect high-volume agents involved in suspect activities, authorities said.

The FinCen <![endif]–> The company said it anticipates taking a $570 million pre-tax charge in its fourth-quarter 2016 financials to cover the settlements and related expenses.