Back
01 July 2022

Western Union Business Solutions (Australia) Pty Ltd

Background

In July 2022, the Financial Markets Authority (FMA) censured Western Union Business Solutions (Australia) Pty Ltd for material breaches of the standard conditions attached to its New Zealand derivatives issuer licence, specifically those relating to net tangible assets (NTA) requirements. The censure followed an FMA investigation into compliance over the period July 2019 to June 2021.

The FMA found that Western Union had contravened Standard Conditions 9(1), 9(2), and 9(6), which require a licensed derivatives issuer to:

  • Maintain NTA at all times of at least the greater of $1 million or 10% of average revenue;
  • Hold at least 50% of required NTA in cash or other liquid assets; and
  • Cease entering into client transactions that could create further liabilities when NTA falls to 90% or less of the required level, unless expressly approved in writing by the FMA.

Western Union acknowledged that, while it could and did replenish its NTA from time to time and no client losses occurred, these factors did not mitigate the breaches. The FMA emphasised that compliance with licence conditions must be maintained at all times, and the ability to remedy shortfalls after the fact does not satisfy regulatory obligations.

In determining the outcome, the FMA noted several mitigating factors based on information provided by Western Union: the issues were reported to the regulator (though not self‑identified), the breaches were promptly remedied, remedial controls were implemented, and the firm is now back in compliance with the relevant standard conditions.

Western Union has held a derivatives issuer licence since January 2015 and is headquartered in Sydney, Australia. The censure relates specifically to its New Zealand business and was issued under section 414(2)(a) of the Financial Markets Conduct Act 2013.

Timeline

July 2022

The FMA censured Western Union Business Solutions (Australia) Pty Ltd for materially contravening key Standard Conditions of its derivatives issuer licence relating to net tangible assets (NTA).

Following an investigation, the FMA was satisfied that, at certain times from July 2019 to June 2021, Western Union materially contravened Standard Conditions 9(1), 9(2) and 9(6) which require:

  • at all times, a licensed derivatives issuer’s NTA to be, at least, the greater of $1 million or 10% of average revenue.
  • a licensed derivatives issuer to have at least 50% of the required NTA in cash or other liquid assets and any remaining balance in either additional cash or cash equivalents, or other liquid assets; and
  • except with the express written approval of the FMA, if a licensed derivatives issuer has 90% or less of the required NTA, it must not under any circumstances enter into any transactions with clients that could give rise to any further liabilities or other financial obligations.

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. However, in the FMA’s view, these matters did not remedy, or reduce the scale of, the contraventions as the Standard Conditions must be met at all times. It is not sufficient for a licensed derivatives issuer to only prove it can meet the requirements.

The FMA acknowledges that:

  • Western Union self-reported (although it did not self-identify) the contraventions of Standard Conditions 9(1), 9(2) and 9(6) to the FMA; and
  • based solely on information Western Union has provided, Western Union:
  • remedied the contraventions promptly;
  • has implemented remedial action to prevent further contraventions; and
  • is now in compliance with Standard Conditions 9(1), 9(2) and 9(6).

Western Union was granted a derivatives issuer licence by the FMA in January 2015. The company is headquartered in Sydney, Australia and the censure relates to its New Zealand business.

Western Union was censured under section 414(2)(a) of the Financial Markets Conduct Act 2013.