Western Union Co. is at the center of a preliminary European Union antitrust inquiry into allegations the company colluded with banks to drive rivals out of the multibillion dollar money-transfer market.
The EU began quizzing firms about the issue in recent weeks, according to two people familiar with the matter, who asked not to be named because the process is private.
The European Commission is examining claims that banks agreed to close accounts of some smaller money-transfer providers, citing concerns that money they deposited may be linked to drug-trafficking or terrorism, one of the people said. Without an account in Europe, smaller remittance firms can't offer their services as the money transits through the banking system.
Western Union is "cooperating with the European Commission following a request for information on the company's business in Europe," the Englewood, Colorado-based company said in a statement. It's "fully supportive of improving understanding of the money transfer sector within a broader competitive framework."
Worldwide, flows from migrant workers in developed countries to relatives back home, known as remittances, were predicted to exceed $441 billion last year, based on World Bank research. Yet banks see remittance companies as fraught with risk because of difficulty determining where money comes from and where it's headed.
Prominent fines, including a $1.9 billion money-laundering charge against HSBC Holdings Plc in 2012 and a $1.7 billion settlement in 2014 for JPMorgan Chase & Co. related to money-laundering controls, reinforced the perception of danger.
EU spokesman Ricardo Cardoso said the commission "is closely monitoring competitive conditions in the money-transfer market," but declined to provide further details. No firms have yet been accused of any wrongdoing and the EU hasn't yet decided whether to open a formal investigation.
While it's the first time the EU has stepped in, concerns over money-transfer firms aren't new. Banks may be " indiscriminately terminating" accounts of all money services businesses in order to avoid regulatory scrutiny, according to a notice released by the U.S. Treasury's Financial Crimes Enforcement Network in November 2014.
Western Union said in the statement that while lenders play a significant role in moving money between accounts, competition is strong. Consumers have various options available from money transfer operators, digital operators, mobile operators, mail and courier services, prepaid cards, travel cards, ATM transfers, and other money transfer services.
U.S. antitrust officials have previously scrutinized Western Union's behavior without finding any foul play. A decade ago, the Justice Department closed a probe examining whether the company's exclusive contracts with retail agents harmed competition in the U.S. or international money-transfer service market.