BREAKING NEWS: Money-Services Business To Pay $18 Million To Settle FTC Claim It Facilitated International Fraud

David C. Vladeck, FTC

David C. Vladeck, FTC

So, you want to offer a money-services business to U.S. customers and not take international fraud seriously?

Be prepared to pony up $18 million to settle fraud claims when they start rolling in.

In a stunning announcement today, the Federal Trade Commission said “at least 79 percent of all MoneyGram transfers of $1,000 or more from the United States to Canada over a four-month period in 2007 were fraud-induced.”

MoneyGram International Inc. is the second-largest money-transfer service in the United States. The Minnesota-based company has agreed to pay $18 million in “consumer redress” to settle claims it turned a blind eye to fraud and permitted “fraudulent telemarketers to bilk U.S. consumers out of tens of millions of dollars,” the FTC said.

Using pointed language, an FTC official said MoneyGram simply could not say no to fees it earned from scammers, including scammers its agents employed.

“Money transfer services have a responsibility to make sure their systems don’t become conduits to rip people off,” said David C. Vladeck, director of the FTC’s Bureau of Consumer Protection. “In this case, MoneyGram not only ducked this responsibility, but also looked the other way while its agents took part in the scams.”

Con artists knew a good thing when they saw it, the FTC said.

“MoneyGram operates through a worldwide network of approximately 180,000 agent locations in 190 countries and territories,” the FTC said. “Con artists prefer to use money transfer services because they can pick up transferred money immediately, the payments are often untraceable, and victimized consumers have no chargeback rights or other recourse.”

In 2007, 72 percent of all complaints received by the FTC involving Canadian-based fraud reported using money transfer services to make payments, the agency said.

And it was not a small sampling of complaints, the FTC stressed.

“Based on the more than 20,600 fraud complaints MoneyGram itself received, U.S. consumers lost more than $44 million to cross-border money-transfer frauds between 2004 and 2008 alone,” the FTC said. “When combined with losses reported by U.S. consumers on money transfers within the United States, that number grows to $84 million.”

At least 65 MoneyGram agents have been charged by Canadian or U.S. authorities or are under investigation in the United States for fraud, the FTC said.

MoneyGram made excuses as complaints piled up, the agency said.

“MoneyGram ignored warnings from law enforcement officials and even its own employees that widespread fraud was being conducted over its network, claiming that proposals to deal with the problem were too costly and were not the company’s responsibility,” the FTC said.

“The company even discouraged its employees from enforcing its own fraud prevention policies or taking action against suspicious or corrupt agents,” the FTC said. “Some employees who raised concerns were disciplined or fired.”

Read the FTC complaint against MoneyGram.

Read the stipulated settlement in which MoneyGram does not acknowledge wrongdoing but agrees to pay $18 million to settle the case and to implement a comprehensive anti-fraud and agent-monitoring program.

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6 Responses to “BREAKING NEWS: Money-Services Business To Pay $18 Million To Settle FTC Claim It Facilitated International Fraud”

  1. Quick note:

    Readers may wish to acquaint/reacquaint themselves with this column by Gregg Evans:

    http://patrickpretty.com/2009/07/09/guest-column-payment-processors-that-give-refunds-unilaterally-help-surf-industry-live-to-see-another-day/

    Patrick

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  2. Now comes the interesting part.

    Whether or not criminal charges will follow.

    The agreement specifically states:

    “7. This Order is in addition to, and not in lieu of,any other civil or criminal remedies that may be provided by law”

    One wonders whether, in the current economic climate, the political will exists to draw a line in the sand with these fraud enablers.

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  3. Quick note:

    Warning by Utah Department of Insurance on international wire-fraud scheme in which the fraudsters used the name of Nationwide Insurance and instructed targets to send $3,750 to the U.K. by MoneyGram or Western Union to claim a $150,000 prize:

    http://www.insurance.utah.gov/docs/PressReleases/PR-Fraud-Nationwide.pdf

    Also, story in The Salt Lake Tribune about a warning put out by the Utah Commerce Department after a woman who tried to sell a dishwasher for $45 in a classified ad received $1,900 in bogus money orders and was instructed to cash them, take out $45 for the dishwasher, another $100 for her inconvenience — and then send the balance to Georgia via MoneyGram.

    The woman, believing she had been targeted in a scam, called her state legislator, who reported the incident to the Commerce Department, which issued the scam warning.

    http://www.sltrib.com/business/ci_13603402

    Patrick

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  4. Quick note:

    Missouri woman, 82, was called on phone and told her grandson, a veteran of the Iraq War and a Purple Heart recipient, had been jailed in Canada and needed $5,000 to get bailed out.

    Could Grandma please wire the money via MoneyGram?

    Grandma wired 5K. The scammers called back and asked for another 5K.

    http://www.stltoday.com/stltoday/news/stories.nsf/stlouiscitycounty/story/C05AA6FDB80800448625765500802A87?OpenDocument

    Patrick

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  5. admin: Quick note:Warning by Utah Department of Insurance on international wire-fraud scheme in which the fraudsters used the name of Nationwide Insurance and instructed targets to send $3,750 to the U.K. by MoneyGram or Western Union to claim a $150,000 prize:http://www.insurance.utah.gov/docs/PressReleases/PR-Fraud-Nationwide.pdfAlso, story in The Salt Lake Tribune about a warning put out by the Utah Commerce Department after a woman who tried to sell a dishwasher for $45 in a classified ad received $1,900 in bogus money orders and was instructed to cash them, take out $45 for the dishwasher, another $100 for her inconvenience — and then send the balance to Georgia via MoneyGram.The woman, believing she had been targeted in a scam, called her state legislator, who reported the incident to the Commerce Department, which issued the scam warning.http://www.sltrib.com/business/ci_13603402Patrick

    Yet they won’t do anything about the ‘google’ scams going on in their own state.
    http://scam.com/showthread.php?t=118436
    http://scam.com/showthread.php?t=56093

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  6. I wonder if Western Union will get the same treatment. 419 scammers use WU extensively. If anyone wants to see the bizarre world of 419 (advanced fee fraud) in action, or more accurately 419 scam baiters, I highly recommend the forum at http://www.419eater.com It’s not really my style but it can be interesting and it makes ASD look like an almost respectable business.

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