U.S. Authorities Investigating Western Union over money moved on its network that may have been tied to alleged fraud

U.S. Authorities Investigating Western Union

Company Says It Has Received Multiple Subpoenas Since November


Updated Feb. 24, 2014 6:53 p.m. ET

Western Union Co. WU +1.93% , the world’s largest money-transfer company, is being investigated by the U.S. government over money moved on its network that may have been tied to alleged fraud, according to a regulatory filing released Monday.

The Englewood, Colo.-based company said in the filing it has received multiple subpoenas since Nov. 25 from the U.S. attorney’s office for the Middle District of Pennsylvania.

The inquiries have sought documents related to complaints made by consumers to Western Union “relating to fraud-induced money transfers since Jan. 1, 2008,” as well as information about Western Union’s agents, the company said.

“The government’s investigation is ongoing and the company may receive additional requests for information as part of the investigation,” Western Union said in its annual report filed with the Securities and Exchange Commission. “The company is cooperating fully with the government.”

Western Union and its smaller competitor, MoneyGram International Inc. MGI +2.19%have been probed by state and federal authorities over whether they have in place adequate controls to prevent scammers from using the companies’ services to collect money from their victims.

A representative of Western Union didn’t have an immediate comment when reached Monday. A spokeswoman for MoneyGram couldn’t immediately be reached for comment.

Both companies offer money transfers, bill-payment services and other products through hundreds of thousands of agent locations around the world, including supermarkets, pharmacies, check-cashing stores, payday lenders and bank branches.

The Federal Trade Commission has been investigating Western Union’s measures to detect instances in which “consumers are deceived into wiring money to third parties,” the agency said in a November court filing. The agency had been battling Western Union over a civil investigative demand the FTC made to the company for information about consumer complaints.

A federal judge in New York ordered the company to comply with the FTC’s request in December.

Western Union said in its filing Monday that it received another civil investigative demand from the FTC on Feb. 21. The FTC requested documents relating to consumer complaints regarding “fraud-induced money transfers” sent from or received in the U.S. since 2004.

Representatives of the U.S. Attorney’s office and FTC declined to comment.

MoneyGram previously reached a settlement with the U.S. attorney’s office for the Middle District of Pennsylvania as well as U.S. Department of Justice over transactions involving the company’s agents in the U.S. and Canada. With the settlement, MoneyGram agreed to enter into a deferred-prosecution agreement, operate under a compliance monitor and pay $100 million to victims of fraud committed through the company’s network.

Earlier this month Western Union reached an expanded agreement with Arizona over the company’s controls for preventing money laundering. The company had originally reached a $94 million settlement with the state and other states over allegations that it didn’t have sufficient controls in place.

As part of the expanded deal, which addresses allegations that the company had failed to put adequate controls in place by July 31, 2013, Western Union agreed to remain under the supervision of a monitor through the end of 2017.

Western Union’s shares were down 1.2% in after-hours trading Monday.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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