PatrickPretty.com

Tag: MoneyGram International Inc.

  • 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.

  • 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.