Why is Western Union Used in Frauds?
I had posed this question to Ed Dickson, who writes the Fraud, Phishing and Financial Misdeeds Blog. Ed responded, via a comment. But I thought the comment was worth an entire post. Here is Ed's reply.
"That's a good question. Western Union and MoneyGram are services that are used, more often than not, by people who don't have established banking relationships.
Since banks have developed shared databases, which prevent people who have gone bad on one account from opening another. This segment of the population is growing (my personal observation/opinion).
In case, no one has ever noticed, banks are pretty adept at making sure they aren't the entity taking a loss. That's a subject all of it's own.
Of course, this rings true only as long as the database can identify a person it is targeting. Identity theft and high quality counterfeit documents are enabling people to open accounts using people's information that passes the database test. This has also caused a lot of innocent people to be pegged as undesirable customers.
Interestingly enough (unless it's changed), Integrated Payment Systems owns Western Union and American Express owns MoneyGram.
Both of them also are big in the money order business, which is another service used by people without bank accounts to pay bills.
A lot of companies, for a fee, also use them as a bill pay service for customers who are running a little late on their payments.
Of course, saying that, there a lot of people who like the fact that the services are relatively anonymous. Criminals tend to hide themselves in anonymous methods of doing financial transactions.
Please note this is true in a lot more places than wire transfer services.
Both of these services are easy ways to wire money, internationally. This provides a means for foreign workers to wire money home.
If you look at where these corporations spend their marketing money, a lot of it is in driving this segment of the business.
Since 9-11, the laws have been tightened up to prevent money laundering. Agents of these companies now have requirements to check identification, keep better records and train their people to detect money laundering.
While this is an improvement, the easy availability of other people's identities and pretty convincing documents to back them up is putting a dent in these efforts.
This is a hard question to answer in a comment, but hopefully I was able at least an idea with how the services work if they are unfamiliar with them."
Thanks, a lot Ed. My guess is that the US banking landscape, that traditionally had no large multi-state deposit taking institutions because of regulatory controls, Western Union met a real need. Today, the legitimate need may be diminished.
