Western Union did nothing to guard against fraud and looked the other way as criminals and scammers used its system to defraud consumers of billions of dollars, the FTC said.
The global company has agreed to enter into agreements with the FTC, the U.S. Attorneys’ Offices of the Southern District of Florida, the Middle and Eastern Districts of Pennsylvania, and the Central District of California.
In its agreement with the Justice Department, Western Union admits to criminal violations including willfully failing to maintain an effective anti-money laundering program and aiding and abetting wire fraud.
U.S. Attorney Wifredo Ferrer of the Southern District of Florida, said, “Western Union, the largest money service business in the world, has admitted to a flawed corporate culture that failed to provide a checks and balances approach to combat criminal practices.”
“Western Union’s failure to implement proper controls and discipline agents that violated compliances policies enabled the proliferation of illegal gambling, money laundering and fraud-related schemes. Western Union’s conduct resulted in the processing of hundreds of millions of dollars in prohibited transactions. Today’s historic agreement, involving the largest financial forfeiture by a money service business, makes it clear that all corporations and their agents will be held accountable for conduct that circumvents compliance programs designed to prevent criminal conduct,” Ferrer said.
Western Union has been on notice since at least December 1997, that individuals use its money transfer system to send illegal gambling transactions from Florida to offshore sportsbooks, the FTC said.
Western Union knew that gambling transactions presented a heightened risk of money laundering and that through at least 2012, certain procedures it implemented were not effective at limiting transactions with characteristics indicative of illegal gaming from the United States to other countries.
FTC Chairwoman Edith Ramirez said, “Western Union owes a responsibility to American consumers to guard against fraud, but instead the company looked the other way, and its system facilitated scammers and rip-offs. The agreements we are announcing today will ensure Western Union changes the way it conducts its business and provides more than a half billion dollars for refunds to consumers who were harmed by the company’s unlawful behavior.”
The FTC’s complaint, filed Thursday in Pennsylvania, alleges that Western Union declined to put in place effective anti-fraud policies and procedures and has failed to act promptly against problem agents.
Western Union has identified many of the problem agents but has profited from their actions by not promptly suspending and terminating them.
In resolving the FTC charges, Western Union agreed to a monetary judgment of $586 million and to implement and maintain a comprehensive anti-fraud program with training for its agents and their front line associates, monitoring to detect and prevent fraud-induced money transfers, due diligence on all new and renewing company agents, and suspension or termination of noncompliant agents.
The FTC order prohibits Western Union from transmitting a money transfer that it knows or reasonably should know is fraud-induced, and requires it to:
- block money transfers sent to any person who is the subject of a fraud report;
- provide clear and conspicuous consumer fraud warnings on its paper and electronic money transfer forms;
- increase the availability of websites and telephone numbers that enable consumers to file fraud complaints; and
- refund a fraudulently induced money transfer if the company failed to comply with its anti-fraud procedures in connection with that transaction.
In addition, consistent with the telemarketing sales rule, Western Union must not process a money transfer that it knows or should know is payment for a telemarketing transaction. The company’s compliance with the order will be monitored for three years by an independent compliance auditor.