The US Financial Crimes Enforcement Network has levied a hefty civil penalty on Western Union Financial Services.

Western Union consented to FinCEN’s determination that it willfully broke the Bank Secrecy Act 1970 before 2012 by failing to implement and maintain an effective, risk-based anti-money laundering programme and by failing to file timely suspicious activity reports. It did so by signing a consent agreement. FinCEN’s penalty comes in conjunction with other action taken by the Department of Justice and the Federal Trade Commission.

Collectively, Western Union businesses comprise a network of approximately 500,000 agent locations in 200 countries and territories worldwide. Although Western Union is a money service business, its fine covers some common ground with that of private banks and asset managers. It failed, for example, to conduct background checks and on-site reviews on a number of its new agents and failed to conduct enhanced due diligence on certain Latin America-based agent locations and FinCEN refers to its AML offences as 'wilful,' saying that certain 'agent locations' and outlets that it suspected were involved in fraud and money laundering were able to continue to use its money transfer system to facilitate their illicit activity.    

Western Union used master agents along the US southwest border with Mexico, who normally contracted with subagents to deliver funds to recipients in Mexico (this model is known as the 'master agent' or 'master payee' model). It failed to conduct or ensure that its master agents conducted onsite reviews of a number of these subagents. Despite its knowledge of the money-laundering-risks involved and the fact that sellers of illegal narcotics in the US often use remittances to send their ill-gotten gains to Mexico, Western Union failed to collect enough information on the identity of its Mexican-based subagents. This prevented it from monitoring them agents to ensure that they were properly identifying the people on the receiving end in Mexico.

Western Union also failed to develop and implement policies and procedures that could be reasonably expected to detect and cause the reporting of suspicious transactions that led to unreasonable delay in filing thousands of SARs. Before 2012, in many cases, it took more than 90 days to send the Internal Revenue Service (to whose database in Detroit FinCEN and other agencies have access) information about eligible activity. Additionally, although Western Union posted off thousands of SARs on the customers of its 'agent locations,' it rarely did so regarding those agents themselves.

Its practice was not to identify 'agent locations' as the 'subjects' of SARs unless it found them to be complicit in money laundering. Typically, it only found an agent to be complicit if that agent was arrested and his collusion unmasked in public, or if Western Union’s own investigation determined that the 'agent location' was complicit.

Western Union has agreed to an increase in scrutiny and periodic reporting regarding "agent SAR reporting" and the disclosure (presumably to FinCEN) of any corrective action it is taking against agents.