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.â€
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.