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Western Union Pays High Price for Poor Culture

Wednesday 31 January 2018

Western Union has agreed to pay $735 million (US$586 million) to fraud victims worldwide.

This compensation scheme is open to customers scammed between 1 January 2004 and 19 January 2017.

While Western Union has escaped criminal trial for now with a Deferred Prosecution Agreement (DPA), it is still the highest penalty brought against a money service. They have also agreed to ‘enhanced’ compliance obligations.

According to the Department of Justice (DOJ), “… admissions contained in the deferred prosecution agreement (DPA) and the accompanying statement of facts, between 2004 and 2012, Western Union violated US 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.”

Many Australians scam victims will have an opportunity to be compensated, if they lodge their complaint with the DOJ before 12 February.

“The sad reality is that, in most cases, once you have fallen victim to a scammer, the money is gone and there’s nothing you can do to get it back. For people who wired money via Western Union between 2004 and 2017, this may be your chance to recover some of it. There are no guarantees, but we strongly encourage you to try by 12 February,” ACCC Acting Chair Dr Michael Schaper said, in a statement earlier this week.

Poor culture, poor compliance
The hard line of the Department of Justice (DOJ), and the one taken by the Australian Transaction Reports and Analysis Centre (AUSTRAC) with regulated Australian entities, should be a wake-up call to organisations that they need to get this process right.

On 19 January, the DOJ indicated that Western Union admitted to criminal violation because they did not have an effective financial crime compliance program.

“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,” said US Attorney Wilfredo Ferrer. “Western Union’s failure to implement proper controls and to 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.”

What is significant from the statement from the DOJ is the focus on the ongoing systemic issue of culture throughout the organisation that greatly impacted their financial crime compliance.

The US Attorney’s Office for the Middle District of Pennsylvania has had a ‘long history’ prosecuting Western Union agents.

“Since 2001, our office, in conjunction with the US Postal Inspection Service, has charged and convicted 26 Western Union Agents in the United States and Canada who conspired with international fraudsters to defraud tens of thousands of US residents via various forms of mass-marketing schemes. I am gratified that the Deferred Prosecution Agreement reached today with Western Union ensures that US$586 million will be available to compensate the many victims of these frauds,” said US Attorney Bruce Brandler.