The Western Union Company is an American financial services company based in Denver, Colorado. The company was founded in 1851 as the New York and Mississippi Valley Printing Telegraph Company by David Hoyt, Hiram Sibley, and Samuel L. Selden in New York City. It changed its name in 1856 to Western Union Telegraph Company after it merged with the Erie and Michigan Telegraph Company, owned by John James Speed, Ezra Cornell, and Francis Ormand Smith. The Western Union Telegraph Company dominated the Telegraph industry in the U.S. for over a century, from the 1860s to the 1980s. Apart from its main business of transmitting and delivering telegram messages, the company achieved great success from pioneering technologies such as Telex and developing other telegraph-related services, including wire money transfer.
Currently, Western Union offers three primary services to its customers. Wire Transfer, where people can send money online or in person at Western Union agent locations worldwide. The money can be collected in person at any other Western Union agent location by providing a 10-digit MTCN and identification. Mobile Money Transfer, where anyone with a smartphone can download their app and send money to other users anywhere in the world and pay bills. Online Money Transfer, where people can create user accounts and send money directly from the Western Union website.
The company’s money transfer services have gotten it into trouble recently, with scammers taking advantage of the Western Union platform to rid people of their hard-earned money. Western Union has faced several lawsuits and paid millions of dollars in settlements. Here are 10 of the most significant lawsuits that the company has faced.
10. Western Union Financial Services, Inc. v. First Data Corp. (Unfair trade practices)
Western Union enjoyed a monopoly on the money transfer industry in the whole of the U.S. for decades before First Data Corporation entered the industry in 1988 and started offering money transfer services to give Western Union some competition. In 1993, Western Union filed a lawsuit against First Data Corporation, alleging violations of the unfair Practices Act. The lawsuit stemmed from a five-month promotion of certain money transfer services below cost by First Data aimed at Western Unions customers. According to FindLaw, First Data’s business was significantly smaller than Western Union’s, with only 8,000 agents across the country compared to Western Union’s 18,000 agents. First Data announced a nationwide price reduction and promotion campaign for domestic money transfers that would run for five months to boost its client base and expand its business.
Western Union was not thrilled by this, and they sued First Data for allegedly violating the Unfair Practices Act and their intentional interference with prospective economic advantage. Western Union sought general, standard, and punitive damages and injunctions to restrain First Data’s cheaper transfers. However, the court ruled in favor of First Data, and the judge found that they did not have requisite injurious intent.
9. U.S. Foreign Assets Control v. Western Union (Violations of the Global Terrorism Sanction Regulations) – $401,697
In 2019, Western Union agreed to a $401,697 settlement with the Office of Foreign Assets Control of the U.S. Treasury Department. The two parties settled in an attempt by Western Union to resolve a potential civil liability suit for nearly 5000 apparent violations of the Global Terrorism sanctions regulation. According to OFAC, between December 2010 and March 2015, Western Union authorized transactions that involved payments to a third party, non-designated persons who proceeded to collect the money from a Western Union sub-agent in Karaiba shopping center in the Gambia. According to the United States Department of the Treasury, the transactions totaled approximately $1.275 million.
OFAC alleged that if Western Union had exercised due diligence, they would have known that their sub-agent in Karaiba was listed on the SDN list. They accused the company of acting with a reckless disregard for U.S. sanction requirements by failing to identify and deactivate the Karaiba locations’ access to the Western Union networks.
8. The Central Bank of Ireland v. Western Union (Anti-money laundering violations) – $1,750,260
In 2015, Western Union agreed to pay $1.75 million after the Central BANK OF Ireland fined the company over failures in its anti-money laundering practices. The Central Bank of Ireland noted that these failures could have potentially left the firm’s payment services vulnerable to money laundering and terrorist financing. The Bank of Ireland director of enforcement accused Western Union of failing to implement efficient systems and procedures to screen and train its agents, monitor, identify and stop suspicious activity, and maintain necessary records.
The Central Bank of Ireland noticed that Western Union did not have appropriate policies and procedures to combat money laundering during its routine inspections. Western Union did not do its due diligence in customer record retention, it did not induct and train its agents, and it lacked systems for monitoring suspicious activities.
7. United States v. Western Union (Multistate Consumer Fraud Lawsuit) – $5 Million
In 2017, Western Union agreed to a $5 million settlement over a multi-state investigation into its money transfer services that led people across the country to send money to scammers and con artists. The District of Columbia would share the $5 million settlement with 49 other states that joined the lawsuit. However, the agreement followed a nationwide investigation into consumer complaints regarding Western Union wire transfers to global fraud schemes.
The allegations presented in the lawsuit were similar to 2 other cases that accused Western Union of violating Anti-money laundering and consumer fraud laws. However, in addition to the $5 million, the multi-state settlement required Western Union to implement a comprehensive anti-fraud program which would help the company detect and prevent fraudulent activities. However, they would protect consumers from becoming victims of fraud.
6. Douglas v. Western Union (Violation of the Telephone Consumer Protection Act) – $8.5 Million
In 2019, Western Union agreed to an $8.5 million settlement to settle a lawsuit alleging it violated the Telephone Consumer Protection Act. Jason Douglas sued the company and filed for damages after he received an unsolicited text message asking for permission to send him periodic automated text messages. However, in the lawsuit, Douglas claimed that he had never consented to receive any text message from the company, and even though the original text was asking him for consent, it violated the TCPA. It is federal legislation protecting consumers from companies’ violations concerning telemarketing. However, these violations include unsolicited texts, spam, robocalls, and calling consumers in the do not call registry. According to the JSH Law Offices, Western Union agreed to pay $8.5 Million, with each class member potentially getting $250 per violation.
5. Olympia Equipment Leasing Co. v. Western Union Tel. Co. (Breach of Contract and attempted Monopolization) – $36 Million
In 1977, Western Union was sued by the Olympia Equipment Leasing Company and ALFCO Telecommunications Company for breach of contract and attempted monopolization. The lawsuit alleged that Western Union conspired to put his two businesses out of business. However, the now-defunct businesses accused Western Union of refusing to give out a list of independent equipment suppliers to new Telex buyers to get customers to buy the Telex terminals directly from them. He accused Western Union of breach of contract by failing to disclose to clients that the equipment was available at lower prices at the Olympia Equipment Leasing Company. However, the jury awarded the plaintiffs $36 million in Anti-trust damages and for breach of contract.
4. New York DFS v. Western Union Tel. Co. (Violation of the New York Bank Secrecy Act and Anti-money laundering laws) – $60 Million
In 2018, Western Union agreed to a $60 Million settlement with the New York State Department of Financial Services. The New York State DFS had sued Western Union for violating the New York Bank Secrecy Act(BSA) and the state’s anti-money laundering laws. According to the N.Y. Department of Financial Services, the DFS investigation uncovered that between 2002 and 2014, Western Union had failed to enact a compliance program for anti-money laundering. However, the compliance program was supposed to help the company detect, stop and report on criminals using their network program to commit fraud, money laundering, and those who were intentionally transacting money below amounts that would trigger regulatory reporting requirements.
The suit accused Western Union of putting profits ahead of its responsibilities to prevent and report any money laundering activities and choosing to maintain relationships with highly profitable but fraudulent agents. However, the settlement came a year after the company agreed to a $586 million settlement over the same accusations.
3. State of Arizona v. Western Union Financial Services (Violation of Anti-money laundering laws) – $94 Million
For over a decade, the states of Arizona, California, New Mexico, and Texas had investigated illicit money transfers and money laundering activities in the southwest border region through Western Union. The investigations found hundreds of millions of dollars were being sent to criminals, including weapons, drugs, and human traffickers. In 2010, Western Union agreed to settle illegal money laundering investigations by the state of Arizona for $94 Million.
Investigators alleged that billions of dollars in smuggling profits had flowed freely between the U.S. and Mexico through Western Union’s money transfer services for years. According to Denver Post, Western Union agreed to pay $50 million to the Southwest Border Anti-money laundering Alliance. $19 Million would be invested in the company’s anti-money laundering program. It provides $4 Million to an independent monitoring program and pay the state of Arizona $21 Million.
2. Tennille v. Western Union Tel. Co. (Failure to notify customers over failed transactions) – $135 Million
In 2015, Western Union was ordered by a court to pay approximately $135 million. The plaintiffs sued the company over failed wire transfers. This alleges state law claims for unjust enrichment and breach of duty, among other things. The plaintiffs filed the class action suit for western union customers who had experienced failed wire transfers. The class divided the customers into three categories. There are those who had already reclaimed their funds from Western Union. However, there are customers whose funds had been escheated to the state. Finally, there are those whose funds were being held by Western Union.
According to the lawsuit, Western Union always holds over $100 million belonging to its customers. The money comes from money transfers that failed to be delivered. Western Union never notified customers whose wire transfers failed. However, they do not know to ask for a refund. However, the company is fully aware of the money transfer failure.
Even though the company has the customer’s contact information, it fails to notify them and holds on to the money. This is until such a time that the customer finds out on their own or the funds are forfeited. According to Leagle, the court ruled that the class members would be paid using $135 Million in unclaimed funds that the company continues to hold and awarded the attorneys $40.57 million from the settlement fund.
1. United States v. Western Union Tel. Co. (Violation of Anti-money Laundering and Consumer Fraud) – $586 Million
In 2017, Western Union agreed to a settlement of $586 Million with the U.S. DoJ, the Federal Trade Commission, and other states. The U.S. government sued Western Union over violations of the Anti-money laundering and Consumer Fraud laws. According to the lawsuit, the FTC claimed that Western Union knew about the fraudulent activities. However, even though they could address and end it, they chose to look the other way.
The lawsuit accused the company of lining its pockets and ignoring numerous customer complaints about fraudulent activities. The suit presented data to support its claims. Between 2004 and 2015, Western Union received complaints about phony online purchases from 146,909 people. This led to at least $187 Million in losses. They received another 75,543 complaints about fake lotteries, totaling $86 Million in losses. The scammers also liked to text unsuspecting family members to wire them money. This is for getting out of jail, totaling $73 Million from 41,897 complaints.
The lawsuit accused Western Union of knowing all this but failing to take action against fraudulent agents. Furthermore, failing to conduct adequate background checks for new agents, and failing to train and monitor them adequately. Western Union’s failure to appropriately address fraudulent activities was unfair trade practice. In addition to the $586 Million, Western Union was required to implement an Anti-fraud program.