Western Union Pays $586 Million in US Federal Penalties for Online Gambling Transactions

Western Union agreed to pay a $586 million federal penalty for allowing agents to send money to illicit online gambling operations in Costa Rica. In doing so, the global financial services company violated US federal anti-money laundering laws.

The Financial Times said that Western Union admitted in a Thursday agreement that it had pleaded guilty to the violations of federal law. Those violations included “aiding and abetting wire fraud” and failure to maintain an effective anti-money laundering campaign.

Western Union admitted to processing hundreds of thousands of transactions for a variety of global fraud schemes over the past dozen years. Online gambling was only one of the various forms of fraud the Englewood, Colorado company supported. For instance, many of those transactions supported a human trafficking ring operated out of China between 2004 and 2012.

Fastest Method for Criminal Transfers

David Bitkower, the Principal Deputy Assistant Attorney General for the US Department of Justice, said that the wire transfers are the most efficient way for organized crime and con men to move money around the globe. Thus, Western Union should do more to help authorities stop such transactions. Bitkower said, “As this case shows, wiring money can be the fastest way to send it; directly into the pockets of criminals and scam artists.”

This is not the first time Western Union has faced federal investigations, according to the Financial Times. In 2005, the company made an agreement with 47 different state attorney generals and the AG of the District of Columbia. That agreement resolved investigations into fraudulent transactions in those 48 jurisdictions.

Bruce D. Brandler’s Criticisms of Western Union

In his summary of the case on the official US Department of Justice website, U.S. Attorney Bruce D. Brandler of the Middle District of Pennsylvania was critical of Western Union and its financial agents.

The DOJ website published the following remarks by Bruce D. Brandler: “The U.S. Attorney’s Office for the Middle District of Pennsylvania has a long history of prosecuting corrupt Western Union Agents. Since 2001, our office, in conjunction with the U.S. 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 U.S. residents via various forms of mass marketing schemes.”

After criticizing the many Western Union agents Brandler has dealt with over the years, the US attorney addressed those he considered to have been harmed by the case. Brandler added, “I am gratified that the deferred prosecution agreement reached today with Western Union ensures that $586 million will be available to compensate the many victims of these frauds.”

3.3% Drop in Share Prices

Share prices dropped 3.3% when the Thursday deal was published. Western Union said it has updated its anti-fraud technology since 2012. It also has designed a “fraud risk management unit” to help with internal investigations of users, while also doubling its compliance staff over the past 5 years.

To cover the costs and fees associated with the agreement, Western Union said it anticipated losses of $570 million over its 2016 Q4 results.

Bill Chandler on Ending the Investigations

Bill Chandler, Western Union‘s chief communications officer, told the Financial Times that his company “worked hard to put these investigations behind us.”

To help put the money laundering scandal behind it, Western Union agreed to have its financial transactions monitored by an independent compliance auditor these next three years. Apparently, that compliance may have had to do with a previously undisclosed probe launched by FinCEN, the U.S. Department Of The Treasury’s Financial Crimes Enforcement Network.

Western Union Company Profile

Western Union was founded in Rochester, New York in 1851. The company held a monopoly in the telegraph business in the mid-to-late 19th century and was the world’s first communications network. Over its first 65 years, the company acquired over 500 competitors, so it had a virtual monopoly by 1915.

The company has been an innovator. Western Union offered the first charge card in 1911. It later was the first to offer teletypewriters, singing telegrams, and intercity fax messages. The company later offered the first Candygrams, while also pioneering the transcontinental microwave system in the 1960s, to replace landline service.

Starting in 1974, Western Union was the first US corporation with its own fleet of geosynchronous satellites. Despite its innovation, the company began to divest itself of telecom assets in the 1980s, as the deregulation era was unkind to the company. Western Union underwent a 6-year bankruptcy reorganization process starting in 1987.

In the past generation, Western Union has begun to send international electronic wire payments, using the famous slogan, “The fastest way to send money worldwide.“