Western Union 2010 Annual Report Download - page 15

Our financial results may fluctuate due to changes in interest rates. We review our overall exposure to floating
and fixed rates by evaluating our net asset or liability position in each, while also considering the duration of the
individual positions. We manage this mix of fixed versus floating exposure in an attempt to minimize risk, reduce
costs and optimize returns. Our exposure to interest rates can be modified by changing the mix of our interest
bearing assets, as well as adjusting the mix of fixed versus floating rate debt. The latter is accomplished primarily
through the use of interest rate swaps and the terms of any new debt issuances (i.e., fixed versus floating). We use
interest rate swaps designated as hedges to increase the percentage of floating rate debt, subject to market
conditions.
International Investment
We have accumulated approximately $2.5 billion of foreign earnings at December 31, 2010, for which no
provision has been made for United States federal and state income taxes, as we have reinvested or expect to reinvest
these earnings outside the United States indefinitely. We intend to invest these earnings to expand and diversify our
global distribution and explore new service offerings. In 2009, we used our foreign earnings to acquire the money
transfer business of our largest European-based agent, FEXCO, and also to acquire Custom House, which expanded
the service offerings of the global business payments segment to include cross-currency, cross-border business to
business payments. We continue to look for opportunities for international acquisitions and investments in joint
ventures that will complement our existing businesses worldwide, such as our recent agreement to acquire the
remaining 70% interest which we currently do not own in Angelo Costa S.r.l. (“Costa”), one of our largest money
transfer agents in Europe, which is expected to close in the first half of 2011. We may also invest in expanding our
current service offerings or our international operating sites to drive organic growth. However, if we are unable to
utilize these earnings outside of the United States and we repatriate these earnings to the United States in the form of
actual or constructive dividends, we would be subject to United States federal income taxes (subject to an
adjustment for foreign tax credits), state income taxes and possible withholding taxes payable to various foreign
countries.
Regulation
Our business is subject to a wide range of laws and regulations enacted by the United States federal government,
each of the states, many localities and many other countries and jurisdictions, such as the European Union. These
include financial services regulations, consumer disclosure and consumer protection laws, currency control
regulations, money transfer and payment instrument licensing regulations, payment service laws, rules, laws
and regulations including those governing credit cards, electronic payments, foreign exchange hedging services and
the sale of spot and forward currency contracts, escheat laws, competition laws and laws covering consumer privacy,
data protection and information security. Our services also are subject to an increasingly strict set of legal and
regulatory requirements intended to help detect and prevent money laundering, terrorist financing and other illicit
activity. Failure to comply with any of these requirements—by either Western Union or its agents or their subagents
(who are third parties, over whom Western Union has limited legal and practical control)—could result in the
suspension or revocation of a license or registration required to provide money transfer services and/or payment
services or foreign exchange products, the limitation, suspension or termination of services, the seizure of our
assets, and/or the imposition of civil and criminal penalties, including fines and restrictions on our ability to offer
services.
We have developed and continue to enhance our global compliance programs, including our anti-money
laundering program, comprising policies, procedures, systems and internal controls to monitor and to address
various legal and regulatory requirements. In addition, we continue to adapt our business practices and strategies to
help us comply with current and evolving legal standards and industry practices. These programs include dedicated
compliance personnel, training and monitoring programs, suspicious activity reporting, regulatory outreach and
education, and support and guidance to our agent network on regulatory compliance. Our money transfer network
operates through third-party agents in most countries, and, therefore, our legal and practical ability to control those
agents’ compliance activities is limited.
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