30 January 2017

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Western Union agrees to pay $586 million penalty for anti-money laundering fraud

Western Union agrees to pay $586 million penalty for anti-money laundering fraud

Western Union Admits Anti-Money Laundering and Consumer Fraud Violations, Will Forfeit $586 Million in Settlement with Justice and FTC Company Also Agrees to Implement Anti-Fraud Program and Enhanced Compliance


The Western Union Company, a global money services business headquartered in Englewood, Colorado, has agreed to forfeit $586 million and enter into agreements with the Justice Department, the Federal Trade Commission, and several United States Attorney’s Offices, including 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 (AML) program and aiding and abetting wire fraud.

According to admissions contained in a deferred prosecution agreement (DPA) and an accompanying statement of facts filed between 2004 and 2012, Western Union violated U.S. laws – the Bank Secrecy Act (BSA) and anti-fraud statutes by processing hundreds of thousands of transactions for Western Union agents and others involved in an international consumer fraud scheme.

As part of the scheme, fraudsters contacted victims in the United States and falsely posed as family members in need or promised prizes or job opportunities. The fraudsters directed the victims to send money through Western Union to help their relative or claim their prize.

Various Western Union agents were complicit in these fraud schemes, often processing the fraud payments for the fraudsters in return for a cut of the fraud proceeds.

Western Union knew of, but failed to take corrective action against, Western Union agents involved in or facilitating fraud-related transactions.

Beginning in at least 2004, Western Union recorded customer complaints about fraudulently induced payments in what are known as consumer fraud reports (CFRs). In 2004, Western Union’s Corporate Security Department proposed global guidelines for discipline and suspension of Western Union agents that processed a materially elevated number of fraud transactions. In these guidelines, the Corporate Security Department effectively recommended automatically suspending any agent that paid 15 CFRs within 120 days.

Had Western Union implemented these proposed guidelines, it would have prevented significant fraud losses to victims and would have resulted in corrective action against more than 2,000 agents worldwide between 2004 and 2012.

Court documents also show Western Union’s BSA failures spanned eight years and involved, among other things, the acquisition of a significant agent that Western Union knew prior to the acquisition had an ineffective AML program and had contracted with other agents that were facilitating significant levels of consumer fraud. Despite this knowledge, Western Union moved forward with the acquisition and did not remedy the AML failures or terminate the high-fraud agents.

Similarly, Western Union failed to terminate or discipline agents who repeatedly violated the BSA and Western Union policy through their structuring activity in the Central District of California, the Eastern District of Pennsylvania, New York City and elsewhere.

The BSA requires financial institutions, including money services businesses such as Western Union, to file currency transaction reports (CTRs) for transactions in currency greater than $10,000 in a single day.

To evade the filing of a CTR and identification requirements, criminals will often structure their currency transactions so that no single transaction exceeds the $10,000 threshold.

Financial institutions are required to report suspected structuring where the aggregate number of transactions by or on behalf of any person exceeds more than $10,000 during one business day.

Western Union knew that certain of its U.S. Agents were allowing or aiding and abetting structuring by their customers. Rather than taking corrective action to eliminate structuring at and by its agents, Western Union, among other things, allowed agents to continue sending transactions through Western Union’s system and paid agents bonuses.

Despite repeated compliance reviews identifying suspicious or illegal behavior by its agents, Western Union almost never identified those agents as the subjects of required reports to law enforcement

In the Central District of California, an investigation by the FBI’s Los Angeles Field Office, IRS Criminal Investigation and local partners into Western Union’s largest West Coast agent found that U.S. Shen Zhou International in Monterey Park sent more than $310 million in Western Union transactions to China – approximately 50 percent of which were structured.

The owner of Shen Zhou – Zhihe “Frank” Wang, 60, of Monterey Park – pleaded guilty late 2013 to one count of structuring international transactions to evade reporting requirement in Santa Ana federal court. Wang admitted making numerous transmission to China in $2,500 amounts, which is just below the $3,000 amount that triggers various BSA reporting and record-keeping requirements for money transmitters, as well as the $10,000 amount that triggers CTR filings. Despite finding repeated violations of Western Union policies, Western Union took no disciplinary action against Shen Zhou beyond one 90-day probation in January 2006 during which Shen Zhou continued to process transactions.

Wang is currently scheduled to be sentenced by United States District Judge Andrew J. Guilford on June 5, at which time he will face a statutory maximum sentence of five years in federal prison.

Based on information uncovered in the Shen Zhou investigation, further investigation by the FBI into Western Union and its “China Corridor” agents found widespread structuring violations. Despite the fact that these high-volume agents failed multiple compliance reviews and continued to aid their customers in illegal activity, Western Union took little to no discipline against the agents, continued to allow the agents to process money transfers and actively encouraged the China Corridor agents to expand their businesses. Between 2003 and 2012, the top five China Corridor agents in the United States structured hundreds of millions of dollars in Western Union transactions.

“Our investigation uncovered hundreds of millions of dollars being sent to China in structured transactions designed to avoid the reporting requirements of the Bank Secrecy Act, and much of the money was sent to China by illegal immigrants to pay their human smugglers,” said U.S. Attorney Decker. “In the case being prosecuted by my office, a Western Union agent has pleaded guilty to federal charges of structuring transactions – illegal conduct the company knew about for at least five years. Western Union documents indicate that its employees fought to keep this agent – as well as several other high-volume independent agents in New York City – working for Western Union because of the high volume of their activity. This action today will ensure that Western Union effectively controls its agents and prevents the use of its money transfer system for illegal purposes.”

“Los Angeles defendant Wang’s company was considered to be among the largest Western Union agents in the United States as over $310 million was sent to China in a span of five years, half of which was illegally structured and transmitted using false identification,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office.

“Rather than ensuring their high volume agents were operating above-board, Western Union rewarded them without regard to the blatant lack of compliance and illegal practices taking place. This settlement should go a long way in thwarting the proceeds of illicit transactions being sent to China to fund human smuggling or drug trafficking, as well as to interrupt the ease with which scam artists flout U.S. banking regulations in schemes devised to defraud vulnerable Americans.”

“In taking responsibility for their actions, Western Union has agreed to cooperate and forfeit more than $500 million for their role in circumventing Bank Secrecy Act reporting requirements,” stated Anthony J. Orlando, the Acting Special Agent in Charge of IRS Criminal Investigation’s Los Angeles Field Office. “Today's outcome is a testament to law enforcement efforts to stem the exploitation of the American financial system ‎and ensure if you conduct business in our country you must abide by our laws.”

Western Union entered into a DPA in connection with a two-count felony criminal information filed in the Middle District of Pennsylvania that charges Western Union with willfully failing to maintain an effective AML program and aiding and abetting wire fraud. Pursuant to the DPA, Western Union has agreed to forfeit $586 million and also agreed to enhanced compliance obligations to prevent a repeat of the charged conduct, including creating policies and procedures:
for corrective action against agents that pose an unacceptable risk of money laundering or have demonstrated systemic, willful or repeated lapses in compliance;
that ensure that its agents around the world will adhere to U.S. regulatory and AML standards; and
that ensure that the company will report suspicious or illegal activity by its agents or related to consumer fraud reports.

“As this case shows, wiring money can be the fastest way to send it – directly into the pockets of criminals and scam artists,” said Acting Assistant Attorney General David Bitkower of the Justice Department’s Criminal Division.

 “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.”
In a related case, Western Union agreed to settle charges by the FTC in a complaint filed in the U.S. District Court for the Middle District of Pennsylvania, alleging that the company’s conduct violated the FTC Act. The complaint charges that for many years, fraudsters around the world have used Western Union’s money transfer system even though the company has long been aware of the problem, and that some Western Union agents have been complicit in fraud.

The FTC’s complaint 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.

“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,” said FTC Chairwoman Edith Ramirez. “The agreements we are announcing 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.”

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.

Since 2001, the Justice Department has charged and convicted 29 owners or employees of Western Union agents for their roles in fraudulent and structured transactions.

The investigation into Western Union was conducted by the FBI’s Los Angeles Field Office and its local partners; the United States Postal Inspection Service’s Philadelphia Division’s Harrisburg, Pennsylvania, Office; IRS Criminal Investigation; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI), Philadelphia; the Office of Inspector General for the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau; the United States Department of Treasury, Office of Inspector General; the Broward County (Florida) Sheriff’s Office; and the United States Department of Labor.

The case is being prosecuted by Assistant U.S. Attorney Gregory W. Staples of the Santa Ana Branch Office, along with Trial Attorney Margaret A. Moeser of the Criminal Division’s Money Laundering and Asset Recovery Section’s Bank Integrity Unit and Assistant U.S. Attorneys in the Middle District of Pennsylvania, the Eastern District of Pennsylvania and the Southern District of Florida. Assistant United States Attorney Frank Kortum of the Asset Forfeiture Section, along with asset forfeiture attorneys in the other U.S. Attorney’s Offices and the Money Laundering and Asset Recovery Section, provided significant assistance in this matter. The Justice Department appreciates the significant cooperation and assistance provided by the FTC in this matter.

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Monday, January 30, 2017

Tags – USA Western Union Money Laundering Fined


rudraprayaga February 01, 2017  

Money is not an essential product now a days but is a substance of fraudness and forgery.