This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.
Earlier this year, in January 2017, Western Union entered into a deferred prosecution Agreement with the Justice department and the FTC, agreeing to pay $586 million in forfeiture to settle anti-money laundering and consumer fraud violations. At the same time, Western Union agreed to pay $184 million in civil monetary penalties for AML violations.
The Western Union prosecution sends an important reminder to financial institutions, traditional banks and nontraditional money service businesses, casinos and paycheck businesses: facilitating criminal activity through financial services creates significant risks for the financial operator. To protect against an enforcement action or regulatory scrutiny, financial institutions need to embrace robust compliance programs that do not fall by the wayside when the business seeks to earn significant revenues from questionable activities.
Western Union protected high-volume independent agents from scrutiny while knowing that these agents were structuring financial transactions in order to evade regulatory scrutiny and facilitate illegal activity.
Western Union’s corporate culture embraced these schemes and failed to provide any checks against independent agents who engaged in suspicious activities. As a result, Western Union engaged in hundreds of millions of dollars worth of transactions that were connected to illegal activity.
In one significant scheme, fraudsters contacted U.S. victims and posed as family members in need or promised prizes or job opportunities. The fraudsters requested that victims send money through Western Union, and specific agents were enlisted as part of the schemes in return for a cut of the fraud proceeds.
Surprisingly, Western Union knew about these fraud schemes but failed to take corrective action. Western Union received numerous customer complaints but failed to take meaningful action against these agents.
To make matters worse, Western Union acquired agents that the company knew prior to the acquisition had ineffective AML programs and were engaged in consumer fraud. Western Union moved forward with the acquisition and took no action to remediate or terminate the high-fraud agents.
Western Union also turned a blind eye to significant numbers of transactions in California and Pennsylvania conducted by agents who structured the transactions to avoid filing CTRs. Instead of correcting these activities, Western Union continued to permit such evasion in order to continue earning significant revenues.
Western Union agreed to a two-count information charging criminal AML and consumer fraud violations. As part of the DPA, Western Union agreed to implement a robust compliance program to prevent lapses in compliance by its agents, ensure that all of its agents will adhere to U.S. regulatory and AML standards and ensure that the company will report suspicious or illegal activity. Western Union agreed to a separate settlement and order with the FTC.
Western Union agreed to the appointment of a monitor for a three-year period to oversee the compliance and remediation program.
The Justice department’s settlement with Western Union came on the heels of separate guilty pleas from three agents for BSA violations. As part of this ongoing investigation, 26 agents and employees previously pleaded guilty to fraud violations.
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Michael Volkov is the CEO of The Volkov Law Group LLC, where he provides compliance, internal investigation and white collar defense services. He can be reached at email@example.com. His practice focuses on white collar defense, corporate compliance, internal investigations, and regulatory enforcement matters. He is a former federal prosecutor with almost 30 years of experience in a variety of government positions and private practice.
Michael maintains a well-known blog: Corruption Crime & Compliance which is frequently cited by anti-corruption professionals and professionals in the compliance industry.Michael has extensive experience representing clients on matters involving the Foreign Corrupt Practices Act, the UK Bribery Act, money laundering, Office of Foreign Asset Control (OFAC), export controls, sanctions and International Traffic in Arms, False Claims Act, Congressional investigations, online gambling and regulatory enforcement issues.
Michael has assisted clients with design and implementation of compliance programs to reduce risk and respond to global and US enforcement programs.
Michael has built a strong reputation for his practical and comprehensive compliance strategies.Michael served for more than 17 years as a federal prosecutor in the U.S. Attorney’s Office in the District of Columbia; for 5 years as the Chief Crime and Terrorism Counsel for the Senate Judiciary Committee, and Chief Crime, Terrorism and Homeland Security Counsel for the Senate and House Judiciary Committees; and as a Trial Attorney in the Antitrust Division of the U.S. Department of Justice.
Michael also has extensive trial experience and has been lead attorney in more than 75 jury trials, including some lasting more than six months. His clients have included corporations, officers, directors and professionals in, internal investigations and criminal and civil trials. He has handled a number of high-profile criminal cases involving a wide‐range of issues, including the FCPA and compliance matters, environmental crimes, and antitrust cartel investigations in countries all around the world.