Western Union to pay $586 million penalty

Western Union Co. has agreed to pay $586 million and admit it failed to stop money laundering and wire fraud as part of a deal with the U.S.

Lapses in the company’s anti-money laundering controls allowed hundreds of millions of dollars in prohibited transactions to be processed, enabling the proliferation of illegal gambling and scams that defrauded tens of thousands of victims, U.S. authorities said Thursday. Undocumented immigrants from China used Western Union to wire money from New York and California to their human smugglers, the Justice Department said.

Aiding and abetting

The U.S. charged the firm with aiding and abetting wire fraud and failing to keep an effective antimoney laundering program. Prosecutors agreed to put the case on hold for three years and drop it if the company makes promised reforms. In the agreement, Western Union admitted that fraudsters around the world used its system to receive dirty money, and it failed to take action.

“Wiring money can be the fastest way to send it — directly into the pockets of criminals and scam artists,” Acting Assistant Attorney General David Bitkower said in a statement. “Western Union is now paying the price for placing profits ahead of its own customers.”

The penalty imposed by the Justice Department and Federal Trade Commission is the biggest ever against a money-services company. It’s part of a wave of settlements in the final days of the Obama administration that have cost companies billions of dollars to resolve probes into toxic debt, foreign bribery and auto-emissions cheating.

Western Union, the largest money-transfer business, said it anticipates taking a charge of $570 million in its fourth-quarter earnings.

“We share the government’s goal of protecting consumers and the integrity of our global moneytransfer network, and we worked hard to resolve these matters with the government,” the Englewood, Colo.-based company said.

Human smugglers

The U.S. said it uncovered hundreds of millions of dollars being sent to China in structured transactions designed to avoid reporting requirements under federal bank laws. It said that much of the money was sent by undocumented immigrants to human smugglers.

Western Union agents, typically retail chains or convenience stores that offer company services, were also complicit in schemes that defrauded people in the U.S.

The government said fraudsters contacted victims in the U.S. and falsely posed as family members in need or promised prizes, lottery winnings or jobs. The fraudsters directed the victims to send money through Western Union, and company agents processed the payments in return for a cut of the proceeds.

Western Union is still facing probes by state attorneys general into the adequacy of its consumer protection efforts.