Written by Shari R. Pogach, Regulatory Paralegal, NCBSO
On January 19, 2017, it was announced that the Western Union Company (Western Union) had agreed to forfeit $586 million and enter into agreements with the Department of Justice (DoJ) and the Federal Trade Commission (FTC) for willful anti-money laundering (AML) violations. Not only did Western Union fail to maintain an effective AML program, it violated the Bank Secrecy Act (BSA) by aiding and abetting wire fraud from 2004 to 2012 by processing hundreds of thousands of transactions for its agents and others involved in international consumer fraud schemes.
The coordinated investigations determined that Western Union agents were: participating in activities to defraud tens of thousands of U.S. residents via various forms of mass marketing schemes promoting prizes or job opportunities; assisting in hundreds of millions of dollars being sent to China in structured transactions (a great deal of this money was sent by illegal immigrants to pay their human smugglers); and not limiting transactions indicating illegal gaming from Florida to other countries offshore sportsbooks.
On the same day the Financial Crimes Enforcement Network (FinCEN) announced its $184 million civil money penalty against a subsidiary of Western Union, Western Union Financial Services, Inc. (WUFSI) for violating the BSA’s AML requirements. Specifically FinCEN determined that prior to 2012, WUFSI failed to implement and maintain an effective, risk-based AML program on foreign agents/outlets and to timely file suspicious activity reports (SARs). The company was found not to have appropriate controls to “effectively mitigate its money laundering risks along the southwest border between the United States and Mexico. For example, in not performing proper or enhanced due diligence, it was found that some former agents owned by persons formerly terminated by WUFSI for money laundering concerns were able to sign “new agent” agreements and continue to use the company’s money transfer system for their fraud and money laundering activities. And, before 2012, WUFSI took over 90 days to investigate activity for which the company had the facts as a basis to file a SAR. WUFSI filed thousands of SARs on customers of its agent locations but only filed such reports on the agent if found to be “complicit.” Typically an agent was only found to be complicit if the agent was “arrested, publicly identified to be implicated in illicit transactions, or if WUFSI’s own investigation determined that the agent location was complicit.” This also delayed reporting.
FinCEN determined that WUFSI willfully violated the program and reporting requirements of the BSA and its implementing regulations. Its $184 million civil money penalty will be deemed satisfied by payment to the DoJ as part of the $586 million forfeiture for the victims of fraud.
Western Union has also agreed to enhanced compliance obligations. This includes 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.”
BSA Blast. The January 2017 issue of the BSA Blast is available today. (NAFCU login required). The articles in this issue cover: the New York State Department Financial Services’ enforcement action against the Agricultural Bank of China for anti-money laundering rules and regulations violations; an example of the importance of updating Bank Secrecy Act compliance programs as an institution’s business model changes; and comments by the deputy director of the Financial Crimes Enforcement Network (FinCEN) on the agency’s current focus. Also included is a BSA quiz that reviews FinCEN’s last four advisories issued for financial institutions.