Western Union 2012 Annual Report Download - page 42

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have refused to enter into exclusive arrangements. See risk factor “If we are unable to maintain our agent, subagent or global
business payments networks under terms consistent with those currently in place, or if our agents or their subagents fail to comply
with Western Union business and technology standards and contract requirements, our business, financial condition and results
of operations would be adversely affected” above.
Upon implementation of the Foreign Account Tax Compliance provisions of the Hiring Incentives to Restore Employment
Act (“FATCA”), which is intended to address tax compliance issues related to U.S. taxpayers holding non-U.S. accounts, certain
of our licensed financial institutions and other entities outside the United States will be required to report to the IRS, directly or
through foreign government agencies cooperating with the IRS, information about financial transactions made by U.S. taxpayers
and could be required to impose withholding, documentation and reporting requirements on such transactions. Full implementation
of FATCA will be phased in over a multi-year period. The additional administrative requirements of FATCA will likely result in
increased compliance costs and could have an adverse effect on our business, financial condition, or results of operations.
Western Union is the subject of governmental investigations and consent agreements with or enforcement actions by regulators.
On February 11, 2010, we signed an agreement and settlement (filed as Exhibit 10.1 to the Company's Current Report on
Form 8-K filed on February 16, 2010), which resolved all outstanding legal issues and claims with the State of Arizona and required
us to fund a multi-state not-for-profit organization promoting safety and security along the United States and Mexico border, in
which California, Texas and New Mexico are participating with Arizona. The agreement and settlement also required us to make
payments to the State of Arizona for its costs associated with this matter. In addition, as part of the agreement and settlement, we
have made and expect to make certain investments in and enhancements to our compliance programs along the United States and
Mexico border and a monitor has been engaged for those programs. On January 23, 2013, the monitor announced his intention to
resign. A replacement monitor has been identified and is subject to court appointment. The costs of the investments in our programs
and for the monitor pursuant to the agreement and settlement were expected to be $23 million over the period from signing through
2013; however, actual costs incurred have exceeded this amount. In addition, in the fourth quarter of 2012, our Business Solutions
business was included in the scope of the monitor's review. Including the costs required pursuant to the agreement and settlement,
the Company has spent over $40 million since 2010 on its compliance programs along the United States and Mexico border. We
are considering entering into an extension of the term of the agreement and settlement or another arrangement with the State of
Arizona, either of which would require the approval of the State of Arizona and could have further adverse effects on our business,
including additional costs. The monitor has made a number of recommendations related to our compliance programs. While the
Company has devoted significant time and resources to these efforts, it is expected that not every recommendation of the monitor
will be fully implemented within the required timeframe ending on July 31, 2013. If the Company is not able to negotiate an
extension of the agreement and settlement or other arrangement and the State of Arizona determines that the Company has committed
a willful and material breach, the State of Arizona has indicated that it will pursue remedies under the agreement and settlement,
which could include initiating civil or criminal actions. The pursuit by the State of Arizona of remedies under the agreement and
settlement could have a material adverse effect on our business, financial condition or results of operations.
We are in the process of making or have made certain changes to our compliance program for transactions from the United
States to Mexico and the Latin America and the Caribbean region, including:
• revisions to agent agreements to increase our ability to oversee the compliance of our agents and their subagents;
• reduced thresholds at which our consumers are required to provide identification for transactions from certain states along
the United States southwest border; and
• enhancement of our information systems including migrating customer information for our Orlandi Valuta and Vigo
brands onto our Western Union database and migrating to a standard point of sale system.
Such changes have had, and will likely continue to have adverse effects on our business, primarily our United States to Mexico
business and our United States to Latin America and the Caribbean business. Such adverse effects include fewer transactions and
lower revenue, increased compliance costs, loss of agents, and a less desirable customer experience. Any additional changes that
we elect or are required to make in the United States to Mexico and the United States to Latin America and the Caribbean corridors,
or similar changes that we may elect or be required to make in other corridors or for our other services, could have a material
adverse effect on our business, financial condition or results of operations.