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Western Union Fraud and Anti-Money-Laundering Failures Securities Class Action

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In January 2017, the Western Union Company agreed to pay $586 million to settle with customers defrauded in transactions with the company. According to the settlement with federal regulators, it had also failed to institute anti-money laundering measures. The complaint for this securities class action claims that the company did not disclose its criminal activity and lack of compliance to the public, in violation of the Securities Exchange Act of 1934, and that it is therefore responsible for stock losses as the truth came out.

The class for this action is all persons who acquired Western Union securities between February 24, 2012 and May 2, 2017.

When Western Union settled with the Department of Justice and other federal regulators in January 2017, it admitted to failing to maintain an effective anti-money laundering (AML) program and to aiding and abetting wire fraud.

The complaint claims that between January 1, 2012 and August 29, 2015 alone, the company received complaints of over $100 million in money-transfer fraud. It says that Western Union also allowed money from illicit activities (such as human trafficking) to be laundered through its services and that it got around AML reporting requirements by methods such as “structuring” transactions.

Even worse, the complaint claims that the company’s own agents were often complicit and even accepted a share of the gains, while the company ignored their actions because it valued high-volume agents. For example, it claims that a certain agent was processing over $100,000 in transfers each day, with much of the money sent to China in structured amounts that violated AML laws, but that the compliance director did not terminate him because the sales department wanted him to continue.

According to the complaint, the Federal Trade Commission (FTC) said that the company had rarely terminated agents even in high-risk countries, including Mexico, Nigeria, Ghana, the Dominican Republic, China, and Haiti, “despite high levels of fraud and indications of complicity at agent locations.”

Still, during the class period, the company claimed in its public filings to be complying with the law. The complaint claims that the company only gradually disclosed its failures, beginning in 2013, when it announced it would have to spend more on compliance. However, according to the complaint, the extent of its failures were only disclosed in after the signing of its settlement agreement in January 2017. Even after that, the class action claims, the company did little to remedy the situation. As information emerged, the company’s stock price fell.

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