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Western Union (WU) Faces $60M Fine for Lapses in Compliance


Western Union Co. WU will be paying $60 million on account of lapses in compliance programs during 2004-2012 period. Earlier, the world’s leading money transfer company accrued $49 million toward resolution of this matter

This payment will be made by Western Union to New York Department of Financial Services (NYDFS) to resolve violations of the state’s law arising out of the facts set forth in the deferred prosecution agreement (DPA) with the U.S. Department of Justice (DoJ).

The DoJ stated that during 2004-2012, Western Union violated U.S. laws as it processed hundreds of thousands of transactions for agents and others engaged in an international consumer fraudulent scheme.

As part of this scheme, fraudsters made contact with victims in the U.S. posing as family members in need or promised prizes or job prospects. The fraudsters compelled the victims to send money through Western Union to help their relative or claim a prize.

However, he NYDFS acknowledged that since 2012, the company made a concerted efforts toward enhancing compliance strategy. To this end, it has made significant investments in compliance spending. The company has also successfully navigated the Southwest Border Anti-Money Laundering Compliance Program, which indicates its inclination toward checking illegal money laundering.

The enhanced compliance program is being undertaken by the company to protect its well-established brand name.

Providing secure and legal transactions is one of the main purviews of a money transfer company and Western Union is trying its best to deliver on this.

This is also evident from a more than 200% increase in overall compliance funding by the company over the past six years. Western Union spends approximately $200 million per year on compliance and has more than one-fifth of its workforce dedicated to these functions.

Apart from investing in compliance, the company is also spending on technology to keep pace with the rapid shift in the space from physical to electronic money transfer. High compliance and investment costs are expected to pressurize the company's bottom line. The company has also seen a weak top line growth since past many quarters due to soft volumes from oil producing countries, forex volatility, stiff competition and weak economy in some parts of the world.

These factors have cumulatively weighed on the company’s share price which are down 8.7% against its industry’s rally of 37.7%.

Western Union carries a Zacks Rank #3 (Hold). Some better-ranked players in the same space are Alliance Data Systems Corp. ADS, FleetCor Technologies, Inc. FLT and Green Dot Corp. GDOT. Each of these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Alliance Data beat estimates in each of the four reported quarters with an average positive surprise of 2.7%.

FleetCor posted a positive earnings surprise in each of the four quarters with an average of 2.5%.

Green Dot beat estimates in each of the four reported quarters with an average positive surprise of 26.9%.

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