Western Union establishes $586 million fund to compensate fraud victims

I just got this link in an e-mail from my township. It describes a $586 million fund that has been established by Western Union to reimburse fraud victims who used wire transfers for payments.

Image Source: pixabay.com, License: CC0, Public Domain

For years, many people who lost money to scams sent their payment through a Western Union wire transfer. Scammers contacted people and promised prizes, loans, jobs, discounted products or other financial rewards in exchange for money upfront. They also pretended to be family members in need of cash or law enforcement officers demanding payment. The scammers told people to send money through Western Union. No one received the cash, prizes or services they were promised.

Because of joint investigations by the FTC, the Department of Justice (DOJ), and the U. S. Postal Inspection Service, Western Union agreed to pay $586 million and admitted to aiding and abetting wire fraud. DOJ is now using that money to provide refunds to people who were tricked into using Western Union to pay scammers.

Apparently, the settlement covers people who were victimized between January 1, 2004 and January 19, 2017. If you, or anyone you know, was victimized by a scammer and made the payments through a Western Union wire transfer, this link may be useful. They list some of the scams as:

• Online or internet scams – you did not receive the items you tried to buy online
• Lottery or prize promotion scams – you were told you won a lottery or sweepstakes, but never got the prize
• Emergency or grandparent scams – you sent money to someone pretending to be a relative or friend in urgent need of money
• Advance-fee loan scams – you paid upfront fees, but did not get the promised loans
• Online dating or romance scams – you sent money to someone who created a fake profile on a dating or social networking website.

One of my relatives was actually telephoned by someone trying to perpetrate an emergency scam a couple years ago, but fortunately recognized it as a scam and did not fall victim.

Additional information is found in the related article, $586 million Western Union settlement: Be careful about the company your company keeps, which says:

“For many years, Western Union’s money transfer system has been used by fraudsters around the world to obtain money from their victims.” That’s how the FTC’s complaint against Western Union opens – and it tells a compelling story of a corporation the FTC says knew that massive fraud was afoot and had the ability to address it, but chose to look the other way. It didn’t end there because according to the lawsuit, even in the face of obvious evidence that many of its own agents were complicit, Western Union ignored it while pocketing massive cash.

and

The settlement imposes the $586 million payment and requires Western Union to put a comprehensive A-to-Z anti-fraud program in place, complete with meaningful training and monitoring to protect consumers in the future. The order also prohibits the company from transmitting a money transfer it knows – or reasonably should know – is fraud-induced. In addition, Western Union will have block money transfers to anyone who is the subject of a fraud report, provide clear and conspicuous warnings to consumers, make it easier for consumers to report fraud, and refund a fraudulently-induced money transfer if the company failed to comply with its anti-fraud procedures.

On one hand, I think it's great that victims of fraud can recover some of their losses. On the other hand, it sounds like a new layer of expensive compliance costs will make the service even more expensive for the company's customer base (although that might be great for the block chain ecosystem!). Also, the requirement to block transfers to any subject of a fraud report is concerning, because it sounds like it may be vulnerable to abuse.

I am also curious what sort of precedent (if any) this will establish for businesses and other actors in the block chain space.

Note that claims must be filed by February 12, 2018, and instructions can be found here.