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Will Western Union's DoJ, etc. deal put impossible pressure on the company?

Editorial Staff

When the Department of Justice and others settled criminal proceedings against Western Union there were two special features: one, liability was admitted and two "ensure that its agents around the world will adhere to U.S. Regulatory and [counter-money laundering] standards."

Is this doable while remaining profitable or does the settlement mean inevitable de-risking and closing in some markets?

It is important to understand some back ground: see http://www.pleasebeinformed.co....

The FTC, for example, was interested in fraud-related cases and requires Western Union to "block money transfers sent to any person who is the subject of a fraud report," amongst other requirements.

The problems that Western Union will encounter are, on the face of it, not so difficult to understand. After all, if the USA did its job properly and applied the FATF's 40 Recommendations in the way they are designed, then regulatory push would already ensure that all overseas branches apply the more stringent of home or host requirements. But the USA, in many fields including financial services, secures a competitive advantage by not applying the same rules at home as it votes for (even argues for) in the FATF and other, similar, organisations. And, as we know from President Trump's announcements, he considers organisations that the USA is a full and active participant in impose rules that, in his mind, reduce the USA's competitiveness.

It is ironic, then, that in some countries, Western Union is held to a higher standard than it is at home. Or would be if any country had the courage to attack them rather than individual agents.

For example, in 2012, Peter Oyewor, then aged 50, was convicted of money laundering via his Western Union agency at his shops in Gravesend, just outside London and Plumstead, South London. He was prosecuted and convicted of laundering more than GBP1.3 million in proceeds of frauds and remitting them to contacts in, mainly, Nigeria. He ran the laundering operation for three years.

Western Union says that it has 29,000 agents in China. Checking compliance with both local law and US law will be a significant expense.

In Malaysia, Western Union operates only via a connection with local banks but its rival, MoneyGram (which is now in play for a takeover in the light of the previously agreed deal with a Chinese conglomerate has been questioned) operates via an arrangement with a local money transmitter which has its own arrangements with many money services businesses including bureau de change.

It is inevitable that the cost of supervising foreign operations will increase dramatically and one way of doing that is through local, properly regulated, businesses but only if the US authorities confirm that those apply acceptable measures.

The fine of almost USD600 was a lot; the costs of compliance will add a significant amount to that. In many jurisdictions, the only sensible measure may be closure.

 


 

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