DOJ Fines Western Union $586M for Criminal Violations

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Monday, February 13th, 2017 | Written by Shane Larson

Western Union is in hot water for failing to protect consumers from fraud, and being complicit in money-laundering schemes. The world’s largest payment processor, which also processes wire transfer payments for some online casinos, has admitted to wrongdoing and has now been slapped with a $586 million fine by the U.S. Department of Justice.

Negligent Business Practices

In late January, the U.S. Federal Trade Commission, the Justice Department, and the US Attorney’s Office for four districts issued a joint statement describing the case. The statement slams Western Union for its business practices, which the government says were negligent and hurtful to customers. To settle the case, Western Union will be forced not only to pay the fine, but also to show proof of changing its business practices to fully comply with U.S. consumer protection and anti-money laundering laws.

The investigation into Western Union’s business practices showed that the company was aware that fraudsters were using the wire transfer service to steal money from unsuspecting Americans. Criminals would instruct victims to wire them large sums of money in order to claim prizes, receive inheritances or complete sales for big-ticket items. The anonymity of wire transfers made it possible for the fraudsters to disappear with the money after the transactions were complete.

Company Looked the Other Way

During the inquiry, it was found that Western Union knew that individuals were using the service to commit fraud, but rather than putting a stop to the practice, the company continued to process transactions to get fees from the criminals. In some cases, it was found that Western Union even received a portion of the stolen funds for cooperating with the scams.

Western Union was also found to be grossly negligent at preventing money laundering. Under U.S. law, all wire transfers processed in excess of $10,000 must be reported to the U.S. Internal Revenue Service. This allows the government to monitor individuals who are frequently sending or receiving large sums of money to ensure that taxes are paid and illegal funds are not being shuttled between individuals.

Widespread Violations

Knowing that transactions over $10,000 would trigger a Currency Transaction Report, employees at Western Union warned money launderers ahead of time, violating the Bank Secrecy Act of the United States. Worse, they helped the criminals structure their wire transfers to avoid being reported by breaking a large wire transfer into several smaller ones of under $10,000 to avoid having to complete reports. Again, Western Union benefited from this by collecting fees on the transfers.

The violations of consumer protections and anti-money laundering laws were not isolated events, though, and during the investigation it was revealed that this type of gross negligence and complicity in crimes were widespread problems. The investigation also found that upper management at Western Union was aware that these things were taking place and allowed the illegal activates to occur systemically. Now, Western Union will be facing more scrutiny, closing a major loophole that criminals have exploited for their gain.

Paying the Price

As a result of the company’s actions which have helped criminals and scam artists fill their pockets, Western Union has been hit with a hefty $586 million fine, which will go towards recompensing consumers who were affected by its “unlawful behavior.” Commenting on the situation, Acting Assistant Attorney General David Bitkower of the DOJ’s Criminal Division, explained:

“Western Union is now paying the price for placing profits ahead of its own customers. Together with our colleagues, the Criminal Division will both hold to account those who facilitate fraud and abuse of vulnerable populations, and also work to recoup losses and compensate victims.”

Surprisingly, though, Western Union customer complaints on the issues dealt with by authorities seems to date back at least eight years, with the company repeatedly failing to discipline its agents who violated the Bank Secrecy Act (BSA). As the DOJ said on the matter:

“Despite repeated compliance review identifying suspicious or illegal behavior by its agents, Western Union almost never identified the suspicious activity those agents engaged in in its required reports to law enforcement.”