Colorado Love, a.k.a. the Western Union settlement

 

This morning my news feed was overwhelmed with tales of the inauguration and the associated protests.  Buried below the lead, however, was the announcement that Colorado’s own Western Union settled criminal and civil claims brought by the Treasury Department, various parts of the Justice Department, and the Federal Trade Commission.

The settlement amount exceeds a half-billion dollars.  And half a billion dollars is a lot of money, as shown by Western Union stock taking a hit right now relative to yesterday’s bell.  But it could have been worse in light of some of the prior news concerning the company’s compliance issues.

First of all, the announcement was made after the markets closed and the day before the inauguration.  From a media relations perspective, burying a settlement of that size in a news day overwhelmed with inauguration coverage was, if intentional, kind of brilliant.

Second, the Justice Department did not publish the deferred prosecution agreement with Western Union. Sure, the FTC consent order (PDF) is available online, but often when the Justice Department scores such a win, the press release is accompanied by the DPA and perhaps even the original indictment.  Unlike in JPMorgan Chase’s Madoff-related settlement (scroll down for PDF), however, neither the Justice Department press release nor the Western Union release included copies of the settlement.

Third, the references to government agencies mentioned in the press release tell us that Western Union was staring down barrels pointed in their direction not only by various U.S. Attorneys, but also by the IRS criminal division, the Consumer Financial Protection Bureau, and the Federal Reserve.  What’s more, the Financial Crimes Enforcement Network and state financial services regulators were noticeably absent from the release, even though FinCEN levied a fine against Western Union on the same day.  Curiously, however, FinCEN also decided not the publish the contents of its settlement in connection with the press release and also decided to deem its penalty satisfied by the $586 million paid by Western Union to Main Justice and the FTC.  Again, this is another win for WU.

Finally, and on a similar note, the FinCEN order made no mention of whether Western Union violated the terms of a 2003 assessment (PDF) imposed by FinCEN for earlier compliance failures.  Specifically, in the 2003 assessment, Western Union agreed to “establish an enhanced nationwide due diligence policy to monitor its agents for BSA compliance.”  The settlement described yesterday likewise highlighted the failures of Western Union to monitor its agents for BSA compliance.  So it’s interesting that no mention of the 2003 assessment appears in the 2017 consent order and again seems to be another win for the company and its lawyers.

For those in the fintech space, it’s also worth noting that (to my knowledge) the Western Union settlement marks the first time that Main Justice and the FTC have collaborated on an enforcement action involving both consumer protection and money laundering concerns that arose out of the actions of a money transmitter.  Once published, along with the FTC order, the deferred prosecution agreement should serve as an important guide for remittance-focused companies seeking to disrupt traditional financial services models, especially those dealing in virtual currency.