NY Fines Money Transfer Company $60M for Lax Controls, Facilitating Suspicious Transactions

The New York State Department of Financial Services fined a large money transfer company $60 million for allowing some of its agents to aid in a significant number of money laundering transactions—including payments that allegedly aided human traffickers in China.  In a Consent Order entered this month, the Department determined that the company “willfully failed” to satisfy its obligation to implement and maintain an effective anti-laundering program designed to deter and detect fraud, money laundering, and “structuring” schemes; failed to exercise “reasonable supervision” over its agents; and did not make the required timely supervisory disclosures to the Department.

The Department found that the company was aware that “a substantial number of its agents were engaging in suspicious activity” on customers’ behalf, but still chose to maintain relationships “with suspect but profitable business partners, sometimes bending its own policies and procedures to do so.”  In fact, the Department found that on one occasion, the company disregarded legal advice in refusing to terminate an agent because a company executive found that the agent was “too significant to the business,” and that its significant compliance issues were outweighed by “the volume” of business the agent brought in.  Even agents who admitted to fraudulent behavior, such as “falsifying records” were permitted to remain in their positions of employment.

Moreover, the company’s own compliance staff found that the company’s agents permitted consumers to apparently structure transactions, failed to file suspicious activity reports in every instance where such a report was required, and failed to have sufficient compliance programs.  The compliance staff also preemptively warned agents who had two or more probations when they were expected to come under review, presumably in an effort to give the agents a chance to avoid more serious discipline.  This behavior allegedly went relatively unchecked for years.

To remedy these issues, and others, the consent order requires the company to pay a $60 million civil monetary penalty to the Department and submit a written plan for an effective anti-money laundering compliance program.

This consent order follows a $586 million deferred prosecution agreement that the same company entered into with the U.S. Department of Justice a year ago—through which the company atoned for allowing customers to be victimized for approximately eight years by criminals participating in wire fraud enterprises—as well as a 2002 agreement with the New York State Banking Department that included an $8 million civil money penalty.

The Consent Order, In the Matter of Western Union Financial Services, Inc., may be found here.