Mon | Jul 16, 2018

Wehby meeting with Western Union compliance unit

Published:Wednesday | January 25, 2017 | 12:00 AMSteven Jackson
Don Wehby, Group CEO of GraceKennedy Limited.

GraceKennedy CEO Don Wehby flew overseas to meet with the head of compliance at Western Union this week, in the wake of a big fine imposed on the global money-transfer company by American regulators.

In an agreement with the US Department of Justice (DOJ), Western Union agreed last week to pay US$586 million to compensate victims whom it was accused of not adequately protecting from fraud.

But while complaints about the Jamaican operation were quantified at US$5.2 million, Wehby told Gleaner Business that GraceKennedy would not be responsible for payment of any associated fine. It will all be borne by Western Union.

The Jamaican conglomerate operates the Western Union franchise in Jamaica and other select Caribbean countries.

"The fines have nothing to do with Jamaica," Wehby said in a phone interview on Tuesday. "I am going to meet with the head of Western Union compliance now. They have made significant changes to their systems and governance since 2012."

The meeting, he indicated, would assess the implications for Western Union's franchise operations in the wake of the fine.

The DOJ fine flows from an estimated US$630 million of fraud complaints. The US$5.2 million of complaints related to Jamaica is a discrete estimate covering the "top four fraud payout agents" since 2007 - all four being Western Union outlets - according to statements from the Justice Department and the Federal Trade Commission (FTC) in documents filed with the documents filed with the US Securities and Exchange Commission.

Wehby said the information in the document should be taken for what it is - that is, the FTC's take on events.




Jamaica's remittance companies were forced to tighten their operations as the lotto scam unfolded, to avoid being conduits of the illicit proceeds.

"Complaints have significantly improved from 2012 and GK put in additional measures in place," said Wehby.

He now says less than one per cent of Jamaican transactions end up in complaints.

"We took the initiative to close Montego Bay and we said there would be no compromise on our network and we changed the IT system ... . In any business like that, you are going to have complaints. But from GK's perspective there are controls which are super tight," said the GK group CEO.

The FTC also acknowledged that Jamaica conducted a reform of Western Union procedures in 2012 to combat these activities, according to the document posted by the SEC.

During that review, Western Union identified and suspended 13 agent locations in Montego Bay that had been processing millions of dollars of fraudulent and potentially fraudulent money transfers related to lottery/sweepstakes fraud, the report added.

"The suspensions only lasted a short time. However, before the agents were reactivated. After being reactivated, 10 of those agents have continued to pay out tens to hundreds of reported fraud complaints each year since 2013, and in that span have been the subject of 2,055 complaints totalling US$737,319," the document stated.

Last year, the US Embassy in Kingston estimated that the lotto scam has bilked Americans of around US$500 million to US$1 billion over time. The estimated US$5.2 million of Western Union complaints spanning nearly a decade is a fraction of that estimate.

Wehby, while not disputing the integrity of the estimates by the US Embassy, said they needed to be reconciled with the FTC assessment, even as he acknowledged that "anecdotally" scammers are using other means outside of the remittance system.

"The figures could be significantly less based on what the US authorities just released. Maybe you can ask them to reconcile that. It would make for a great discussion," he said.

The US$586-million fine to be paid by Colorado-based Western Union relates more than 550,000 complaints about scam-related money transfers between 2004 and 2015.

As part of the agreement reached with the FTC and DOJ, Western Union agreed to put in place and maintain an anti-fraud programme and properly train its staff to identify potential fraud.

Western Union said in a release that over the past five years, it has increased compliance funding by more than 200 per cent, and now spends approximately US$200 million per year on compliance.