Western Union Urged To Tighten ReinsDate: Thursday, October 21, 2004
The Treasury Department's Financial Crimes Enforcement Network wants Greenwood Village-based Western Union to tighten controls over its vast worldwide web of money-transfer agents, according to a story in The Wall Street Journal on Wednesday.
"Our concern is, do the money-service businesses here really know who they are dealing with abroad, even though they are their agents?" said William Fox, the network's director, in a statement. "To the extent they don't, that provides a serious weakness."
Fox said he plans to push Western Union toward closer oversight of its agents through a regulatory process known as "industry guidance," which is due out shortly.
Officials worry that the company may be expanding too rapidly and pushing into risky locales where its use of independent agents invites trouble.
Western Union agent locations have mushroomed fourfold since 1998 to 200,000, with about 75 percent of those agents located outside the United States. The money-transfer company is a subsidiary of First Data Corp., which is also based in Greenwood Village.
"We are confident that our agents are well-selected and are good business partners. In addition, our foreign agents are independently licensed and regulated by their own jurisdictions, and approximately 70 percent are banks or post offices," Western Union said Wednesday in response to The Wall Street Journal report.
Joseph Cachey, deputy compliance officer for Western Union Financial Services, vigorously disputes claims of lax oversight of agents.
But he said Western Union began checking criminal backgrounds of its U.S. agents for the first time only last year.
Such checks are impossible abroad, he said, but the firm does investigate the backgrounds of potential partners in high-risk areas such as the Middle East.
The Wall Street Journal article said government officials know they must tread gingerly. A crackdown on Western Union risks pushing both criminals and ordinary folks to take their business underground, erasing the paper trail maintained by Western Union and the intelligence it provides.
The firm is more helpful than most in helping them track dirty money and build criminal cases, officials said.
Western Union's ease of use and global reach take it into some rough neighborhoods and attract the scourges of 21st-century life.
In preparation for the Sept. 11, 2001, terrorist attacks, an al-Qaeda paymaster used various aliases to wire more than $20,000 to hijackers in the United States, The Journal said.
More recently, Italian authorities have discovered that one of the groups currently terrorizing Iraq, Ansar al Islam, used a Western Union agent in Milan to move funds to Turkey, Greece and Singapore.
Today a central issue for regulators is the company's relationship with its agents, who are independent contractors kept at arm's length and paid commissions.
That keeps costs to a bare minimum and can help to reduce Western Union's legal liability in fraud cases, The Journal story said. But it also limits Western Union's ability to police the agents.
Since Sept. 11, 2001, Western Union has paid $11 million in fines for failure of its U.S. agents to comply with money-laundering laws, The Journal story said.
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