N.Y. Fines Western Union $60M for Lax Money-Laundering Controls

By Jeff Bater

Money transfer giant Western Union will pay New York state $60 million to settle allegations it violated money laundering laws and ignored suspicious transactions to China.

Western Union failed to maintain an effective anti-money laundering program from 2004 to 2012, the New York Department of Financial Services (DFS) said in a statement Jan. 4.

A DFS investigation found the money services company did not implement a program to detect and deter suspected criminal fraud, money laundering, and illegal “structuring” schemes—in which large sums are broken into several smaller transactions to avoid detection by authorities.

The DFS said its investigation also discovered senior Western Union executives and managers willfully ignored, and failed to report to DFS, suspicious transactions to Western Union locations in China, including money transfers that may have aided human trafficking.

Western Union has more than 2,800 agent locations in the state. In 2008, Western Union paid the owner of a Manhattan travel agency a $250,000 bonus to renew his contract with the company despite numerous compliance violations, DFS said. The owner later admitted to authorities he knew that at least some customers used Western Union’s money transfer services to pay debts to human traffickers based in China, the department alleged.

Falling Short

Transactions involving New York agents in 2016 yielded $224 million in revenue for Western Union, bringing gross profits of about $50 million, according to DFS. Maria T. Vullo, New York’s financial services superintendent, accused the company of putting profits ahead of its responsibilities to detect and prevent money laundering and fraud.

“DFS will not tolerate unlawful activity that undermines anti-money laundering laws and endangers the integrity of our financial system,” Vullo said in a statement.

Western Union, in a news release, said it has acknowledged certain conduct in the 2004-to-2012 period fell short of its goal of protecting consumers and the integrity of its global money transfer network. But the company added it has since made “substantial improvements.”

“Over the past six years, Western Union increased overall compliance funding by more than 200 percent, and now spends approximately $200 million per year on compliance, with more than 20 percent of its workforce currently dedicated to compliance functions,” it said.

To contact the reporter on this story: Jeff Bater in Washington at jbater@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com

Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.