In the announcement last week that Western Union had agreed to pay $586 million as part of a settlement with the Justice Department and the Federal Trade Commission to resolve investigations into anti-money laundering and consumer fraud violations, authorities described the settlement as the “largest forfeiture ever imposed on a money services business.”
What should payment facilitators take away from this settlement?
“As evidenced by this fine, anti-money laundering law matters,” said Rich Consulting president and compliance expert Deana Rich.
The most obvious reminder for payment facilitators is that companies are held accountable for their responsibilities under government regulations laid out by laws such as the Bank Secrecy Act. These regulations require payments businesses to follow certain practices to avoid facilitating criminal activity.
“As a major player in the money transmittal business, Western Union had an obligation to its customers to ensure they offered honest services, which include upholding the Bank Secrecy Act, as well as other U.S. laws,” said Chief Richard Weber of Internal Revenue Service-Criminal Investigation (IRS-CI) in the announcement.
As PaymentFacilitator.com has previously reported, payment facilitators are expected to have AML policies in place that address both onboarding (“know your customer”) and monitoring for and responding to suspicious behavior. Both sides contribute to the prevention of criminal activity.
The announcements regarding the settlement cited Western Union’s response to suspicious activity as the primary issue.
In its own statement, Western Union said that the agreements resolve investigations “focused primarily on the Company’s oversight of certain agents and whether its anti-fraud program, as well as its anti-money laundering controls, adequately prevented misconduct by those agents and third parties.”
The investigations were primarily concerned with activity between 2004 and 2012, the company said.
“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 U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida. “Western Union’s failure to implement proper controls and 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.”
While significant attention within the PF community is paid to the role of onboarding submerchants, their responsibility as entities that facilitate entry into the payments system doesn’t end there, Rich said.
She advises payment facilitators to “say what you do, and do what you say.” Establishing policies and procedures is important for outlining what a company will do to adhere to the law and guard against criminal activity. But those policies are just the first step, she said.
“Proper reporting and proper accountability are a must,” she said. “PFs need to know that compliance is not just a check box. There must be accountability through establishing the proper programs, reporting, and follow-up. Checks and balances must be in place.”
Those checks and balances need to be a part of a corporate culture that views compliance as an independent and important business function, Rich said. “Sales cannot run compliance. It must be an operational function that is taken seriously.”
In its statement, Western Union said that it has made significant changes to its compliance program over the last five years, now spending more than $200 million per year – what the company says is a 200% increase in funding – with more than 20% of its workforce dedicated to compliance.
That investment has included more training for agents and changes to its governance structure so that its chief compliance officer reports to the Compliance Committee on the company’s board of directors, the company said.