KABOOM! Money-Services Firm That Turned A Blind Eye To International Scammers Will Forfeit $100 Million After Probe By U.S. Postal Inspection Service

“MoneyGram knowingly turned a blind eye to scam artists and money launderers who used the company to perpetrate fraudulent schemes targeting the elderly and other vulnerable victims.”Lanny A. Breuer, Assistant Attorney General, Nov. 9, 2012

BULLETIN: The price of willful blindness just went up if you’re a money-services business that facilitates international mass-marketing fraud.

A Dallas-based company that turned a blind eye to scammers using its money-transfer system will forfeit $100 million and has admitted “to criminally aiding and abetting wire fraud and failing to maintain an effective anti-money laundering program,” the U.S. Department of Justice said this morning.

MoneyGram International Inc. and the Justice Department also have entered into a deferred-prosecution agreement in which the company will adopt “a worldwide anti-fraud and anti-money laundering standard” and implement other changes, the agency said.

The case against MoneyGram was brought by federal prosecutors in the Middle District of Pennsylvania after a probe by the U.S. Postal Inspection Service.

MoneyGram’s “broken corporate culture led the company to privilege profits over everything else,” said Lanny A. Breuer, assistant attorney general and head of the Justice Department’s Criminal Division.

“Thousands of citizens in Pennsylvania and other states suffered heartbreaking financial losses for years because of these international telemarketing schemes which depended on MoneyGram’s facilities to give them an electronic highway to move their illegal profits quickly out of the country,” said U.S. Attorney Peter Smith. “The determined work of U.S. Postal Inspectors and federal prosecutors disrupted and closed that electronic highway, hopefully for good.”

A top postal inspector said that scammers who took advantage of MoneyGram’s laxity targeted “the most vulnerable in our society.”

“Businesses are supposed to provide their customers with fair and honest services,” said Karen V. Higgins, inspector in charge of the Philadelphia Division.

From the Justice Department statement (italics added):

According to court documents, starting in 2004 and continuing until 2009, MoneyGram violated U.S. law by processing thousands of transactions for MoneyGram agents known to be involved in an international scheme to defraud members of the U.S. public.  MoneyGram profited from the scheme by collecting fees and other revenues on the fraudulent transactions. 

The scams – which generally targeted the elderly and other vulnerable groups – included posing as victims’ relatives in urgent need of money and falsely promising victims large cash prizes, various high-ticket items for sale over the Internet at deeply discounted prices or employment opportunities as “secret shoppers.”  In each case, the perpetrators required the victims to send them funds through MoneyGram’s money transfer system. 

Despite thousands of complaints by customers who were victims of fraud, MoneyGram failed to terminate agents that it knew were involved in scams.  As early as 2003, MoneyGram’s fraud department would identify specific MoneyGram agents believed to be involved in fraud schemes and recommended termination of those agents to senior management.  These termination recommendations were rarely accepted because they were not approved by executives in the sales department and, as a result, fraudulent activity grew from 1,575 reported instances of fraud by customers in the United States and Canada in 2004 to 19,614 reported instances in 2008.  Cumulatively, from 2004 through 2009, MoneyGram customers reported instances of fraud totaling at least $100 million.

“In addition to forfeiting $100 million, which will be used to compensate victims, MoneyGram must for the next five years retain a corporate monitor who will report regularly to the Justice Department,” Breuer said.

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10 Responses to “KABOOM! Money-Services Firm That Turned A Blind Eye To International Scammers Will Forfeit $100 Million After Probe By U.S. Postal Inspection Service”

  1. Find it hard to believe this is bigger than western union.

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  2. I thought when someone collected money, they had to show ID.
    So when will they be contacting the scammers. They do have a record of their photo ID don’t they? Then it should be easy to trace them.

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  3. John: I thought when someone collected money, they had to show ID.
    So when will they be contacting the scammers. They do have a record of their photo ID don’t they? Then it should be easy to trace them.

    John: do you pretend to be stupid or you are? Fake IDs are easy to make. Possibly agents allowed reception of money without it at all.

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  4. >>John: do you pretend to be stupid or you are? Fake IDs are easy to make. Possibly agents allowed reception of money without it at all<<

    i regularly send money by western union and also receive money. I can assure you if I tried to collect money without an ID I wouldn't get a penny. If anyone doesn't believe me I will personally take them to 100 agents and will give 10,000 dollars if I mange to collect money from any agent without ID.

    As far as fake IDs go, that is true. In that case maybe there needs to be a method of authorising the ID, like is done with credit cards when a transaction is made.

    Or am I stupid because I ask?

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  5. Good news, especially the retention of a corporate monitor for the next 5 years.

    With a bit of luck the Justice Department’s next stop will be Western Union.

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  6. John: >>John: do you pretend to be stupid or you are? Fake IDs are easy to make. Possibly agents allowed reception of money without it at all<<i regularly send money by western union and also receive money. I can assure you if I tried to collect money without an ID I wouldn’t get a penny. If anyone doesn’t believe me I will personally take them to 100 agents and will give 10,000 dollars if I mange to collect money from any agent without ID.As far as fake IDs go, that is true. In that case maybe there needs to be a method of authorising the ID, like is done with credit cards when a transaction is made.Or am I stupid because I ask?

    Not just for this question. You have history of really dumb and scum defending questions and replies. That remark was mostly for your previous posts.

    On your reply. Yes, you are right that you need ID to withdraw money. But if you read FEDS’ complain, clerks knew that people withdrawing money were not the same people as IDs they presented. Money Gram management knew that, knew who offended clerks are and did nothing to stop it. not even reported them to police.

    This happens a lot in Central African countries where level or illegitimate transactions is greater than level of legitimate transactions. Money Gram knows that they will not able to find honest clerks in that countries for they money they pay them so they should have closed offices in most offended areas of the world. Instead Money Gram did business as usual.

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  7. Boris. let me put it this way. I choose to ask relevant questions. If they seem ‘dumb and ‘scum defending’ to you then I could say the same about your comments. It is not dumb to ask an obvious question as to how money is allowed to be paid, in spite of the fact ID should be shown. I’m not as naive, dumb or placid as you might think. If you want a war of words, I can assure you you wouldn’t win. I just choose to address the issue rather than making personal attacks. Maybe you should too.

    As I said, it seems that the agents themselves cannot be trusted in various locations. Which is why an authentication check on the ID should be done on every transaction – just as it is done in credit cards sometimes.

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  8. @John, You can have all the authentication checks you like, but if the Money Gram agents themselves do not enforce the checks and Money Gram let them continue to get away with it, what is your solution? Money Gram clearly were not willing to institute non local authentication for the possible reasons Boris has already mentioned.

    As the saying goes “you can take a horse to water but you can’t make her drink”

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  9. John: As I said, it seems that the agents themselves cannot be trusted in various locations.

    Did you not read the entire article, John ??

    Despite thousands of complaints by customers who were victims of fraud, MoneyGram failed to terminate agents that it knew were involved in scams. As early as 2003, MoneyGram’s fraud department would identify specific MoneyGram agents believed to be involved in fraud schemes and recommended termination of those agents to senior management. These termination recommendations were rarely accepted because they were not approved by executives in the sales department and, as a result, fraudulent activity grew from 1,575 reported instances of fraud by customers in the United States and Canada in 2004 to 19,614 reported instances in 2008

    It doesn’t “seem anything.

    MoneyGram executives knew as far back as 2003 and failed to act.

    Thus the penalty.

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  10. So when do they go after Solid Trust Pay and the other ponzi bankers?

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