Western Union has been censured by the Financial Markets Authority for failing to hold enough cash to back its foreign exchange derivatives.
The Financial Markets Authority Te Mana Tātai Hokohoko (FMA) said Western Union Business Solutions (Australia) did not at all times hold enough capital to meet its licencing requirements.
Following an investigation, the FMA found that at certain times from July 2019 to June 2021, Western Union net tangible assets (NTA) fell below the greater of $1 million or 10% of its average revenue.
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It was also required to have at least 50% of that in cash, or other liquid assets.
Without the express written approval of the FMA, a licensed derivatives issuer that did not meet these requirements must not enter issue new derivatives.
“Western Union maintained it had the ability to replenish its NTA to the required level, it did so from time-to-time, it was able to provide services to clients with no issues, and there was no actual loss or risk of loss to clients arising from the contraventions,” James Greig, FMA director of supervision said.
“Western Union maintained it had the ability to replenish its NTA to the required level, it did so from time-to-time, it was able to provide services to clients with no issues, and there was no actual loss or risk of loss to clients arising from the contraventions,” James Greig, FMA director of supervision says.
“It is not sufficient for a licensed derivatives issuer to only prove it can meet the requirements,” he said.
The rules were in place to reduce risks of client harm and loss, he said.
“Western Union’s contraventions left open the possibility of client harm and loss, and its continued entry into transactions that gave rise to further liabilities increased the possibility of harm,” Greig said.
“We were concerned about the significant number and value of transactions that occurred while Western Union was in breach, as well as the duration of the breach, making this a material contravention.”
The breaches were self-reported by Western Union to the FMA, and the company had taken steps to prevent further breaches of its licence.
Western Union is headquartered in Sydney, Australia and the censure related to its New Zealand business, the FMA said.
Correction: an earlier version of this story incorrectly stated Western Union Business Solutions (Australia) was a money transfer service. (Amended July 19, 2022. at 8.38pm)
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