North Carolina will receive $256,000 as part of a $5 million fraud settlement between 49 states and Western Union, the world’s biggest money service company. As part of the settlement Western Union has agreed to monitor and train its agents and to implement anti-fraud measures.
The multi-state settlement, announced Tuesday, concludes a fraud investigation of international money laundering, wire fraud and other violations spanning more than a decade. The case resulted in a separate $586 million settlement with federal law enforcement agencies that the Federal Trade Commission called the largest forfeiture ever imposed on a money services business.
An estimated 16,000 people in North Carolina were victims of the international fraud schemes laundered through Western Union money transfers, according to the office of N.C. Attorney General Josh Stein. Those who believe they may have been victims can seek restitution through the U.S. Department of Justice’s Victim Asset Recovery Program.
North Carolina’s portion of the multi-state settlement will go toward investigative, enforcement and related costs, Western Union said in a statement. The Englewood, Col.-based company did not deny the allegations but said it now spends $200 million a year on compliance and dedicates more than 20 percent of its workforce to compliance functions.
“The incidence of consumer fraud reports associated with Western Union money transfers has been extremely low – less than one-tenth of 1 percent of all consumer-to-consumer money transfer transactions during the past 10 years,” according to a statement from Western Union. “Over the last five years, the dollar value of reported fraud in consumer-to-consumer transactions, compared with the total value of all such transactions, has dropped more than 60 percent.”
According to the Federal Trade Commission, more than 2,000 Western Union agents participated in fraudulent transactions between 2004 and 2012. Western Union was aware that its agents were processing prohibited transactions for illegal schemes, but the company did not intervene, the FTC said.
Among the violations cited were helping criminals structure money transfers under $10,000, below the reporting threshold of the Bank Secrecy Act. And in some cases Western Union agents collected a cut of the proceeds from the illegal transactions they were processing, the FTC said.
According to the FTC’s federal complaint, Western Union’s money transfer system has been used by criminals worldwide for years, and money transfers are now the preferred payment method for consumer scams. Between January 2004 and August 2015, Western Union received at least 550,928 complaints about fraudulent money transfers totaling at least $632.7 million. More than 80 percent of the complaints in Western Union’s database came from U.S. consumers, the FTC said.
The average consumer fraud loss in Western Union’s complaint database was about $1,148, more than three times the amount of Western Union’s average money transfer between 2010 and 2014. But the database records only a fraction of the fraud perpetrated, and the total amount of fraudulent money transfers likely amounted to billions of dollars, the FTC said.
The complaints spanned internet purchases, lottery prize scams, emergency scams, advance-fee loan scams and online dating scams. The FTC said only a small group of agents were involved in the scams, but Western Union failed to investigate or terminate agents known to be involved in suspicious activity.
The agents who colluded with criminals permitted fraudsters to pick up money transfers using fake IDs, or without IDs. In some cases Western Union agent locations recorded the same IDs for multiple recipients or different IDs for the same recipient. In other cases the fraudulent transfer records show no birth dates or fake birth dates such as 1/1/1900 for the person receiving the cash.