A plaintiff has brought a lawsuit on behalf of shareholders against Western Union Co., alleging that the company misrepresented its compliance with anti-money-laundering rules for years in light of the company's recent agreement to settle charges that its AML oversight was deficient.
The complaint, filed in a California district court, cites several annual regulatory filings on Form 10-K that state that the company's AML oversight procedures were in compliance with regulatory requirements, "evolving legal standards" and business practices prevalent throughout the industry at the time.
The complaint then cites Western Union's agreement to settle two federal investigations that charged the company with violations for failing to maintain an effective anti-money-laundering program. The company is paying penalties totaling $586 million.
Shareholders have suffered meaningful losses resulting from Western Union's "wrongful acts and omissions" and from a 3.9% decline in the company's stock price following the settlement, the complaint states.
The suit was filed less than a week after Western Union admitted to criminal violations for its AML failures and for aiding and abetting wire fraud in a deferred prosecution agreement with the Department of Justice and the Federal Trade Commission. For an eight-year period through 2012, Western Union violated the Bank Secrecy Act and other anti-fraud laws by "processing hundreds of thousands of transactions" for company agents and others involved in a consumer fraud scheme, the Justice Department said, citing admissions documented in the deferred prosecution agreement.
Western Union also failed to take the appropriate actions against agents who repeatedly violated company policies and provisions of the act after allegedly learning of the fraudulent transactions, investigators said. In one instance, the company allegedly sent hundreds of millions of dollars to China in an effort to circumvent reporting requirements of the act, U.S. Attorney Eileen Decker said in a statement.
Western Union President and CEO Hikmet Ersek, CFO Rajesh Agrawal and former CFO Scott Scheirman were also named as defendants in the lawsuit.
Western Union "intends to vigorously defend itself against this lawsuit," a company spokesperson said in an emailed statement.