<http://online.wsj.com/article_print/0,,SB110246667558793883,00.html> The Wall Street Journal December 8, 2004 U.S. BUSINESS NEWS U.S. to Order Wire-Transfer Firms To Boost Their Vigilance Overseas By GLENN R. SIMPSON Staff Reporter of THE WALL STREET JOURNAL December 8, 2004; Page A2 WASHINGTON -- The booming U.S. money-transfer industry must step up efforts to ensure that its overseas agents aren't engaging in corrupt activity, federal regulators say. Under rules expected to be issued today, the Treasury Department's Financial Crimes Enforcement Network is ordering First Data Corp.'s Western Union and other wire-transfer companies to closely monitor their foreign agents for suspicious activity and to make sure they have policies against money laundering and no affiliations with criminal enterprises. During the next 180 days companies are expected to come up with programs for conducting due diligence of foreign agents, monitoring them and terminating them when necessary. Firms will be audited for compliance by the Internal Revenue Service. "If they are going to take steps to help protect the gateways to the U.S. financial system, this is a rational thing for them to be doing," said FinCEN director William Fox. The global-remittance industry moves more than $70 billion across international borders annually, mostly for migrant workers and small businesses, and is growing. Regulators are concerned that foreign agents of U.S. fund-transfer companies are a vulnerable area in the struggle against money laundering and other criminal activity because weak regulations in many other nations make it hard to keep criminals out. A page-one article in The Wall Street Journal in October reported that at Western Union alone, the number of agents has mushroomed, to more than 200,000 today from 50,000 in 1998, with much of the growth overseas where it is difficult to vet local operators. In justifying its new "guidance," FinCEN officials said they uncovered "several instances" of suspected criminal activity by foreign agents of U.S. businesses. "There are a variety of ways in which a money-services business may be susceptible to the unwitting facilitation of money laundering through foreign agents or counterparties," the agency said. The cases depict an elaborate and largely successful strategy to launder money through the U.S. financial system. First, FinCEN said, transfer agents made bulk sales of sequentially numbered travelers checks and large blocks of money orders to suspected criminals. These financial instruments "usually had illegible signatures or failed to designate a beneficiary or payor," FinCEN said. " The instruments were then negotiated with one or more dealers in goods, such as diamonds, gems or precious metals, deposited in foreign banks, and cleared through U.S. banks." By the end of the process, "the clearing banks were so far removed from the transactions that they could not trace back or screen either the intervening transactions or the individuals involved in the transactions." Mr. Fox said the examples cited aren't from one specific region of the world, and declined to name the companies. "It is a generalized problem and one we need to address across the board," he said. He emphasized that companies will have discretion to determine the exact steps needed for individual foreign partners depending on their assessment of the risks involved, and that the government isn't trying to discourage firms from entering into such relationships. "Our notion is to make this safer and more transparent, so it does not go underground," he said. -- ----------------- R. A. Hettinga <mailto: rah@ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'