Western Union 2015 Annual Report Download - page 118

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Economic and trade sanctions programs administered by the United States Department of the Treasury's Office of Foreign
Assets Control ("OFAC") and by certain foreign jurisdictions prohibit or restrict transactions to or from (or dealings with or
involving) certain countries, their governments, and in certain circumstances, their nationals, as well as with certain individuals
and entities such as narcotics traffickers, terrorists and terrorist organizations. We provide limited money transfer and payments
services to individuals in Cuba, Syria and Sudan in accordance with United States laws authorizing such services and pursuant to
and as authorized by advisory opinions of, or specific or general licenses issued by, OFAC.
In the United States, almost all states license certain of our services and many exercise authority over the operations of certain
aspects of our business and, as part of this authority, regularly examine us. Many states require us to invest the principal of
outstanding money orders, money transfers, or payments in highly-rated, investment grade securities, and our use of such
investments is restricted to satisfy outstanding settlement obligations. We regularly monitor credit risk and attempt to mitigate our
exposure by investing in highly-rated securities in compliance with these regulations. The substantial majority of our investment
securities, classified within "Settlement assets" in the Consolidated Balance Sheets, are held in order to comply with state licensing
requirements in the United States and are required to have credit ratings of "A-" or better from a major credit rating agency.
These licensing laws also cover matters such as government approval of controlling shareholders and senior management of
our licensed entities, regulatory approval of agents and in some instances their locations, consumer disclosures and the filing of
periodic reports by the licensee, and require the licensee to demonstrate and maintain certain net worth levels. Many states also
require money transfer providers and their agents to comply with federal and/or state anti-money laundering laws and regulations.
Outside of the United States, our money transfer business is subject to some form of regulation in almost all of the countries
and territories in which we offer those services. These laws and regulations may include limitations on what types of entities may
offer money transfer services, agent registration requirements, limitations on the amount of principal that can be sent into or out
of a country, limitations on the number of money transfers that may be sent or received by a consumer and controls on the rates
of exchange between currencies. They also include laws and regulations intended to detect and prevent money laundering or
terrorist financing, including obligations to collect and maintain information about consumers, recordkeeping, reporting and due
diligence, and supervision of agents and subagents similar to and in some cases exceeding those required under the BSA. In most
countries, either we or our agents are required to obtain licenses or to register with a government authority in order to offer money
transfer services.
The Payment Services Directive ("PSD") in the European Union ("EU") and similar laws in other jurisdictions have imposed
rules on payment service providers like Western Union. In particular, Western Union is responsible for the regulatory compliance
of our agents and their subagents who are engaged by one of our payments institution subsidiaries. Thus, the costs to monitor our
agents and the risk of adverse regulatory action against us because of the actions of our agents in those areas have increased. The
majority of our EU business is managed through our Irish payment institution subsidiary, which is regulated by the Central Bank
of Ireland. Under the PSD and similar laws in certain other jurisdictions, we are subject to requirements such as investment
safeguarding rules and periodic examinations similar to those we are subject to in the United States. These rules have resulted in
increased compliance costs and may lead to increased competition in our areas of service. Additional countries may adopt legislation
similar to these laws. The PSD, as well as legislation in other countries, has also allowed an increased number of non-bank entities
to become money transfer agents, allowing Western Union and other money transfer providers to expand their agent networks in
these countries but also resulting in increased competition.
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