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How Effective is Your Anti-Money Laundering Program?


At the end of January, Western Union agreed to pay the United States government $586 million to resolve allegations that it failed to maintain an effective anti-money laundering program under the Bank Secrecy Act and aided and abetted wire fraud. The government alleged that fraudsters would contact victims and pretend to be relatives who needed money for some legitimate-sounding reason or promise prizes or job opportunities. The fraudsters would then direct the victims to transfer their money through Western Union, and Western Union agents complicit in the scheme would receive a portion of the proceeds. Western Union was apparently aware of the activity as early as 2004, but did nothing about it.

According to the government, Western Union's anti-money laundering program was not effective to address this fraudulent activity. As part of its settlement agreement with the government, Western Union is now required to engage in enhanced compliance measures so that it will be better equipped to address future instances of fraud and money laundering. Among those compliance measures are the following:

  • Establish an independent Compliance Committee of the Board of Directors with direct oversight of the Chief Compliance Officer and the Compliance Program, including the anti-money laundering and anti-fraud programs;
  • Adopt a worldwide compliance and anti-money laundering standard in conformity with U.S. laws;
  • Implement an evaluation process and bonus structure that evaluates executives on efforts to ensure compliance with U.S. laws;
  • Create policies and procedures to ensure compliance with U.S. laws on the filing of Suspicious Activity Reports (SARs);
  • Assign anti-money laundering compliance officers to oversee compliance in countries designated as high risk for fraud or money laundering; and
  • Establish reporting requirements that address consumer fraud complaints, SAR reporting and corrective actions every 90 days.

This is not the first time the government has required enhanced compliance measures for a company that failed to effectively address money-laundering fraud. In 2012, after concluding that their anti-money laundering programs were insufficient to detect and remedy fraud, the government required both MoneyGram International and HSBC Bank to adopt similar measures. Like Western Union, MoneyGram was alleged to have processed thousands of transactions known to be related to an international scheme to trick victims into wiring money to fraudsters by posing as relatives or by promising prizes. As for HSBC, the government alleged HSBC knowingly conducted transactions on behalf of customers in various countries subject to sanctions enforced by the Office of Foreign Assets Control at the time of the transactions.

The enhanced requirements imposed upon Western Union, MoneyGram and HSBC suggest that companies should be examining their anti-money laundering programs to ensure they comport with U.S. laws and, importantly, are being enforced internally. To the extent those programs fail, the consequences – financial and reputational – could be severe and widespread. For example, shortly after Western Union disclosed the fraud, investors filed a putative securities class action against it.

For more information about anti-money laundering programs or to discuss analyzing your company's anti-money laundering compliance measures, please contact Joe D. Whitley, Robert E. Hauberg or a member of Baker Donelson's Government Enforcement and Investigations Group.

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