Banned from using Western Union. Is it worth filling out the paperwork to get past this?

Question

Aside from my main job, I’ve been tutoring a couple of students online and regularly receiving payments from them via Western Union, as they live in a different country. A couple of weeks ago, a transfer sent to me was automatically returned to the sender when I tried to collect it in cash at a Western Union agent. I called Western Union and was told that I had received too much over a certain period and was now banned from using their system. They said there’s only one way for me to try to lift the ban: I have to fill out a form that asks about my relationship with the senders, the purpose of the payments, and requires supporting documents such as invoices.

Is it worth trying, given the actual purpose of the payments? Or is it against the rules to use Western Union to receive payments for tutoring? Would I be at any risk if I disclose to Western Union that I’ve been using their system for this purpose?

Also, since the invoices were not always very formal, could it work if I simply attached screenshots of the online meeting journal from the platform, along with my qualification diploma, an explanation, and a summary of tutoring hours and received payments? Or is this unlikely to be accepted unless I create and attach formal invoices?

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Update: I initially assumed Western Union was asking me to fill out the form and provide documentation to ensure the transfers weren’t linked to something sinister, like money laundering or drugs. However, an answer below suggests a different reason: Western Union may be collecting this information to report me to the government in compliance with regulations. Given that the transfers averaged just US$350 per month, that I'm in the European Union, and that I haven't formalized my tutoring 'business', do I risk serious trouble if Western Union reports me? Could it be a bad idea to complete the questionnaire at all?

I haven't broken any laws except perhaps by not formalizing my tutoring - and thus possibly by slightly underpaying my taxes. However, it's just a couple of students and only US$350 per month. I never thought that helping a couple of acquaintances for monetary compensation truly required formalization of my 'business.'

Answer 1

Western Union is used to transfer cash between locations. In many countries cash transactions are strictly regulated, even more so when borders are crossed in transfer. Dealing in large enough amounts of cash is usually a sign of someone wanting to stay under the government radar because they're doing something illegal: tax evasion, dealing in prohibited items, or dealing with prohibited people.

In many countries financial institutions are required to alert the government when they suspect someone is doing something shady in cash. It can be either a mandatory requirement (e.g.: in the US, a cash transaction over $10K), or a subjective requirement (e.g.: in the US, a bank clerk suspects that the multiple cash transactions are intended to avoid a single >$10K transaction that would trigger mandatory reporting).

To make this report to the government a certain information may be required that WU doesn't currently have about you, hence the questionnaire. Once they flagged you, they will not continue doing business with you until you give them an opportunity to comply with their regulatory obligations.

Generally, for cross-country legitimate business, dealing in cash seems like a very counter-productive idea. There are many systems and service providers that allow cross-country payment clearing (e.g.: PayPal/Venmo, SWIFT/SEPA bank transfers, traditional credit card processors, etc.).

If you're tutoring through some service (as it seems that you are), inquire whether they can also facilitate payments for you.

Sure, all that may cost certain fees, but then you won't run into regulatory restrictions that may end up blocking the flow completely and adding some unnecessary meetings to your calendar.

Answer 2

There are several possible reasons:

• Payment Services Providers and other companies manipulating money (e-money issuers, etc.) have to comply with a number of regulations:

  • KYC: Know you customer.
  • AML: Anti-Money laundering
  • CTF: Counter Terrorism Financing

  Basically, they need to know who is sending money, to whom, for what purpose.

  Details vary from country to country, but the principle in most non-tax-haven countries is the same.

  In most places, there are "simplified" regimes up to a certain amount (per month, per year or lifetime). This is what enables people to open a payment account in seconds with minimal documentation, and need to provide additional documentation only if they exceed a given threshold.

  I don't have the current thresholds at hand, but IIRC the limit is around €3000 (lifetime) in the EU.

  For this reason, there is usually no automatic/systematic reporting after that. They just need to know, block payments if they don't have the data or it looks fishy, report if it looks fishy.

  Note that in this case we are talking about money being moved (payments). It does not mean it's necessarily revenue (that needs to be taxed), so they can't report it automatically as revenue just because you receive money.

  Also note that this is definitely not specific to WU, all other PSPs will have similar checks. Some may do it upfront rather than after you reach a threshold, but they will make the checks at some point. Depending on the PSP and the payment methods, once you reach the threshold and until you provide the required explanations and evidence, they may either block payments to you (nobody can initiate a payment to you), or hold them (people can initiate a payment, but you won't receive the money until you provide the required details).

  It definitely does not mean that you are "banned", just that they are not allowed to process any more payments to you until they have the info.

• In many countries, there is also a requirement for some businesses (especially "intermediary" platforms) to declare any revenue you make through them past a certain threshold. This is the case for platforms like AirBnb, platforms where you sell you services or goods, etc. This is to ensure that you correctly report your revenue and pay the relevant taxes.

  Selling a little bit of old junk on a personals site is fine. Selling thousands of euros worth of goods or services all year long is a business, and there may be taxes involved.

  I believe there's more variability here (from one country to another in the EU), but the threshold will usually be around €3000/year.

  In this case, there is automatic reporting, because they know it is revenue. Depending on the country and a lot of details, you may need to provide a tax number and/or show you are registered as a business. Sometimes they just report your revenue for you, and then this automatically gets added to your tax return, and you will pay tax on that without having to do much. Sometimes they report it, and it's up to you to take the required steps to make sure the tax authorities can match things up.

  I'm honestly not sure this would apply to WU (they're a payment services provider, not an intermediary platform, so many payments may not be revenue, just your family sending you money for instance), but again, this may vary from country to country.

• In the case of payment services providers, there is an additional threshold, usually around €10 000 per transaction (or group of transactions if you try to split a big one in several small ones), where there is automatic reporting. Apparently you're not there yet.

• In addition, each payment service provider may have their own policies, to detect fraud patterns (WU is used in a lot of scams), or to prevent them altogether. I believe they don't actually like being used for such payments, but rather only for sending money to family and the like. Receiving money from a large number of different sources may not be something they like. You should probably check WU's rules.

  It may be worth it considering other payment systems, though which ones are appropriate may depend a lot on the country of origin of the payments, and what payment means your customers have (bank account, debit card, credit card, cash...). It may also mean that the fees are paid on your side rather than by the sender, and that you may be liable for disputes/chargebacks (cancellations by the user, if you can't justify the charge).

I think the most likely cases applying to you here are #1 and #4.

But if you are making several thousand euros a year in additional revenue through services, you are running a business, and you should register as such, and handle the relevant paperwork. Depending on the country and the exact regime, this can vary from extremely simple and lightweight to a lot more complex.

Answer 3

[The other answers already explain as to why WU might've flagged you, so I'm focusing on your other questions, with a focus on germany because that's all I know]

What might happen if you are reported (assuming that you haven't been already).

You have proof of source (or can obtain it, I assume your students have some kind of payment slip from WU and would attest to you tutoring them). I hope you have some kind of correspondence regarding scheduling to prove that you did in fact do enough work to warrant the amount of money (if push comes to shove and you're investigated). Regarding the formality of your invoices (or rather lack thereof): Since your client isn't in Germany, German law regarding required info etc. do not apply (legally speaking, what WU may have in their TOS is a different matter, but the tax office can't complain)

Neither you nor the money is involved in inherently criminal (let alone terrorism-adjacent) activity. Nor is the money being laundered from unknown sources.

So those potentially heavier offences are off the table

What you did do wrong depends heavily on the specific country. The EU is not a country after all.

In germany for example tutoring does not require you to register a business as it's one of the activities that a natural person can carry out directly. How other countries treat self-employment (and/or teaching activities) in this regard is something you'd need to research yourself.

However, even in Germany, you didn't (yet) pay any taxes, nor declare the income, which even if you don't earn enough to pay taxes is required. Good thing is though that you can file your taxes retroactively for I think up to 3 years (unless you've filed already. In that case: You (potentially) committed tax fraud). This general obligation to file this income as potentially taxable is probably universal across the EU. Note that in Germany you are not obligated to file a tax return generally, *unless you earn through non-employed means (such as tutoring!), which means you might be (or have been, depending on how long this has been going on for) required to file your taxes. The regular limit for filing taxes is July of the following year so if you started in 2024 you're all good as long as you do it now. [This site claims that retroactive filing on your own volition is possible for far longer though I do not know how that interacts with the fact that you may have been required to file, if it's earlier than 2024 I'd suggest investing in a tax advisor or similar for a consultation]. If you did start in 2024, just file (including this income) and you are completely fine and legit (assuming that you did not receive any income-based social assistance or similar, though those usually are pretty lenient as well as long as you initiate the "I was technically overpaid" process on your own).

Also in Germany, depending on your other sources of income, you may have "lied" to your health insurance, as that is based on your primary job (of which the relative income is a major factor). I absolutely doubt that with 350$ a month but I wanted to list it for completions sake. If you're a student with little to no other income, the bar for them to claim studying is not your main occupation is incredibly high. If you do hold another job it suffices to have provably spent more time there or that you earn more (which shouldn't be hard).