Western Union to pay $94 million to settle Arizona dispute

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Western Union to pay $94 million to settle Arizona dispute

PHOENIX Western Union has agreed to a $94 million settlement Thursday in disputes with Arizona prosecutors that center on the state's effort to reduce the flow of immigrant and drug smuggling money through wire transfers.

The deal includes $50 million for a nonprofit center that will offer grants to law enforcement agencies in California, Arizona, New Mexico and Texas to tackle money laundering and the smuggling of immigrants, drugs and guns along the 2,000-mile border.

"We have literally changed the game," Arizona Attorney General Terry Goddard said of the settlement accepted by Maricopa County Superior Court.

The deal ends several years of disputes over whether Arizona prosecutors should have access to certain records of wire transfers, and whether they can seize suspected smuggling money headed to northern Mexico.

Authorities also have alleged in court that Western Union had some unscrupulous agents who knowingly helped smugglers send money to Mexico.

Western Union will pay $7 million to each of three Arizona law enforcement agencies to pay for costs of investigating the company and its agents.

The company will spend another $19 million to strengthen its own anti-money laundering efforts and pay an additional $4 million for independent monitoring of those efforts.

As part of the settlement, Western Union also will provide unprecedented access and analysis of records of wire transfers.

Joseph Cachey, Western Union's chief compliance officer, said the company is doing more monitoring of transfers and research of its agents in the field.

"If you took a look at our business today, compared to maybe four years ago, you'd see that the transaction data would show that there is a completely different type of picture being painted," Cachey said.

Authorities said the smuggling proceeds that flow through wire transfer services come mostly through immigrant smuggling, though some drug smugglers use wire services.

Many federal law enforcement agencies and analysts believe that $25 billion in drug proceeds are smuggled out of the U.S. each year. Most of the money is sneaked across the border in cars.

In Arizona alone, immigrant smuggling has been estimated to be a $1.7 billion a year business.

For more than four years, Goddard had used special court orders that allowed his prosecutors to seize $17 million in wire transfers flowing to Arizona that authorities said were payments to smugglers.

Prosecutors said their previous efforts were so successful that smugglers began to route their payments from other American states to northern Mexico.

Authorities responded by trying to seize money transfers going into the northern Mexican state of Sonora.

Western Union challenged such seizures, arguing Arizona prosecutors had no power to interfere with transfers into another country.

Last summer, the Arizona Supreme Court put the brakes on the effort by authorities.

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Another version of the story:

Border fight's new front

The company will pay $94 million, most of which will go toward helping border states such as Arizona and California fight money laundering from Mexico smugglers.

By Nicholas Riccardi

February 12, 2010


Reporting from Denver - Western Union will pay $94 million to settle a long-running legal battle with the state of Arizona over whether the company allowed its money transfers to be used to send proceeds from human trafficking and drug smuggling to Mexico, officials announced Thursday.

The settlement includes $50 million that will help law enforcement operations in border states fight money laundering. Western Union has also agreed to beef up its internal procedures to stop its wire transfers from being exploited.

"Attacking the flow of illicit funds from the United States to smuggling cartels in Mexico is fundamental to our goal of crushing the cartels," Arizona Atty. Gen. Terry Goddard said.

David Schlapbach, executive vice president and general counsel of Western Union, said in a statement: "Assisting law enforcement in its efforts to combat illegal activity serves the public interest on both sides of the border and helps protect those who use our services."

The settlement resolves a legal battle that started in 2006. Goddard's office was in the midst of a years-long investigation of human traffickers when it filed papers to seize all transfers of more than $500 headed to the Mexican state of Sonora, Arizona's southern neighbor.

Western Union sued to prevent the state from getting the transfers and the information on who was sending and receiving the money.

In an interview Thursday, Goddard said that his office found tantalizing leads when it seized the first round of transfers and that, as part of the settlement, it would again have access to that information.

Goddard said that border criminals have many ways to launder money, but that "for a long time, especially in the area of human trafficking, wire transfers were the way it happened. . . . It was almost totally anonymous, very fast, and they could corrupt individual clerks to accept almost any kind of identification."

In two months in 2005, $28 million was wired via Western Union from the U.S. to Sonora, with two-thirds of that money traveling to just eight Western Union agents in five Mexican border cities, all well-known hubs for traffickers sending illegal immigrants into Arizona. In one town, a single customer received $68,000 in 34 payments in those two months.

Such data led Goddard's office to seize the payments to Sonora, sparking the legal battle.

Goddard said that since 2007, even as Western Union fought the state in court, it significantly improved its safeguards against money laundering and is bolstering them even more now.

As part of the settlement, Western Union will spend $19 million to strengthen those internal controls and $4 million for independent court monitoring of its efforts. It will also pay $21 million for Arizona's legal costs.

The remaining $50 million goes to a fund that can be accessed by all border states to fight money laundering, human trafficking, gun smuggling and other border issues.

"For years, billions of dollars in smuggling profits have flowed freely between the United States and Mexico," California Atty. Gen. Edmund G. Brown Jr. said in a statement. "Today's agreement with Western Union gives our region the resources and cooperation we need to stem the flow of illicit cash across our borders."

Goddard, who is running for Arizona governor, said that when his office began to investigate cross-border money laundering, cartels moved to other border states. He hopes the settlement will enable the entire region to join the fight.

"Just to be a rock in a stream is very little satisfaction," he said. "Now we've got a dam 2,000 miles across."