Western Union (WU) allowed criminals to use its global money transfer service to carry out “hundreds of thousands” of scams, the company admitted in a federal settlement under which it will return $586 million to victims of the fraud.
The Federal Trade Commission said Thursday that Western Union knews for “years” that scammers were using its services, but ignored the signs. That included more than 550,000 customer complaints the company received between January 2004 and August 2015. Scammers racked up billions in fraudulent transactions over that time period, the agency said.
In one scam, criminals would call a Western Union customer and direct them to wire money to claim a prize or to help a relative. Once the money was sent, it could not be recovered. Some Western Union agents went along with the scam for a cut of the profits.
“Western Union owes a responsibility to American consumers to guard against fraud, but instead the company looked the other way, and its system facilitated scammers and rip-offs,” said FTC Chairwoman Edith Ramirez in a statement announcing the settlement.
Western Union spokesman Bill Chandler said in a statement that the company was “pleased to move forward.”
“We acknowledge that in certain instances, mainly from the 2004 to 2012 period of time, the company did not engage in as much oversight as it should have. We will continue raising the bar to protect customer transactions and to defend those who would use our network,” he said.
As part of the settlement agreement, Western Union must block money transfers that it knows are fraudulent, including to people who are subjects of a fraud report; provide fraud warnings on its money transfer forms; and make it easier for customers to file fraud complaints, the government said. An independent auditor will monitor the company for three years.
The U.S. Department of Justice will administer the refund program. Details on how victims of the scams can seek a refund will be provided at a later date.
Western Union shares dropped 4 percent after the announcement but largely recovered by the close of trade.