LOS ANGELES (CN) – Financial services giant Western Union has agreed to pay $586 million for allowing its agents to process hundreds of thousands of fraudulent transactions as part of a consumer fraud scheme that funneled money between the United States and China.
The U.S. Justice Department said Thursday that Western Union has agreed to forfeit $586 million to the scheme’s victims. The financial services company admitted to prosecutors that it had failed to prevent the wire fraud despite knowing its agents were making the fraudulent transactions, revealed as part of a massive consumer fraud scheme.
Had the company enacted proposed guidelines for suspending agents suspected of processing illegal transactions it could have helped prevent the losses to victims of the scheme, prosecutors said. Such guidelines would have led to corrective action against more than 2,000 agents worldwide between 2004 and 2013.
FBI agents investigated a $310 million consumer fraud scheme and snared Zhihe “Frank” Wang, 60, who pleaded guilty in late 2013 to structuring transfers to China through his former Western Union agency Shen Zhou International in Monterey Park. He broke down transfers to $2,500 to evade regulators: a transaction of $3,000 is required to trigger reporting and record-keeping requirements under the Bank Secrecy Act, according to the U.S. Attorney’s Office.
Scam artists duped victims into parting with money for prizes or job opportunities and directed victims to send money through Western Union. Numerous Western Union agents were involved in processing transactions, the U.S. Attorney’s Office said.
Deirdre Fike, assistant director of the FBI’s Los Angeles field office, said that the settlement should help authorities prevent illicit funds from being used for smuggling and drug trafficking.
“Los Angeles defendant Wang’s company was considered to be among the largest Western Union agents in the United States as over $310 million was sent to China in a span of five years, half of which was illegally structured and transmitted using false identification,” Fike said in a statement. “Rather than ensuring their high-volume agents were operating above-board, Western Union rewarded them without regard to the blatant lack of compliance and illegal practices taking place.”
According to prosecutors, Western Union let Shen Zhou International off lightly by imposing one 90-day probation in January 2006. Shen Zhou continued to make transfers during that period.
Western Union said it shared the government’s goal of protecting consumers and preventing fraud.
“We are committed to enhancing our compliance programs to prevent illicit activity on our network and protect customers who transfer money to friends, family and businesses,” Western Union said in a statement.
As part of a deferred prosecution agreement related to the two-count felony complaint in a Pennsylvania federal court, Western Union agreed to improve oversight of agents to ensure they fail to comply with U.S. regulations and anti-money laundering standards. It also entered into a consent order with the Federal Trade Commission.