MoneyGram hit with $18 million fine for looking the other way while consumers got scammed
Filed under: Ripoffs and Scams, Fraud, Consumer Ally
MoneyGram International, Inc., has agreed to pay $18 million to settle federal charges that the money transfer service allowed itself to be a conduit for con artists who allegedly bilked people out of tens of millions of dollars.The money will be used to help consumers recoup some of their losses, the Federal Trade Commission said. MoneyGram is also being required to install an anti-fraud program and monitor its agents, the FTC said.
According to the FTC, between 2004 and 2008, MoneyGram agents helped criminals make away with $84 million wired to Canada and around the U.S.
Having money sent by a wire transfer service is a common method used in a variety of scams, mainly those requiring an upfront payment to participate. Consumers likely lost considerably more, the FTC said.
Despite being aware its system was being used for fraudulent transactions, MoneyGram did little to stop it, the FTC alleged.
"Money transfer services have a responsibility to make sure their systems don't become conduits to rip people off," David C. Vladeck, director of the FTC's Bureau of Consumer Protection, said in a statement. "In this case, MoneyGram not only ducked this responsibility, but also looked the other way while its agents took part in the scams."
A small number of agents were involved in the overwhelming majority of fraud cases, but the company did nothing to address that, the FTC said. A significant number of the cases were cross-border, with money sent from the U.S. to Canada.
An estimated eight of every 10 MoneyGram transfers of $1,000 or more from the United States to Canada over a four-month period in 2007 were fraud-induced, according to the FTC.
MoneyGram issued a statement expressing its commitment to policing its system.
"At MoneyGram, we take the issue of consumer fraud very seriously. Our ability to provide safe and reliable money transfer services for our consumers is critically important," Pamela H. Patsley, MoneyGram chairman and CEO, said in the statement. "MoneyGram has committed extraordinary resources to building a state-of-the-art consumer anti-fraud program."
MoneyGram also took issue to the FTC allegations that the company allowed the fraud to perpetuate.
"While we don't agree with the FTC's allegations regarding our fraud prevention in the past, we can agree on fraud prevention today and in the future," Patsley said. "We don't want our customers being victimized by third-party fraud. What we are announcing ... our commitment to enhance our already comprehensive efforts to combat fraud and ensure our customers can continue to rely on MoneyGram for safe, reliable money transfer services."
Reader Comments (Page 1 of 1)
10-21-2009 @ 1:37PM
meMYSELFandIRENE said...
western union is just as bad i went to pay for an auction i was new to about 6-7 years ago and they wanted the deposit via western union which i didnt know wasnt safe you would figure these places would get an ID from the person picking up the money to verify its going to the right person. WRONG. i lost 1500 bucks and the FBI internet crime division told me 1500 was pocket change and they couldnt do anything about it. i wish `1500 bucks was pocket change and im lucky i didnt pay for the rest via western union i told them no i would pay in cash on pick up (it was a car). never again have i used these sort of services they do NOT check IDS and are NOT safe to use
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10-23-2009 @ 4:25PM
M said...
Actually Western Union, though anonymity can be high in transfers - is actually quite safe. There are controls and thresholds in place for both send and receive transactions. Their services are merely a tool that is used to send money. Though it is unfortunate you were tricked into sending funds using Western Union, the decision was pretty much up to you to send the funds. A simple search on the web would have returned a myriad of articles on internet/auction/prepay scams and how one should carefully research before taking the risk of sending the funds to someone not personally known.
Any money transfer service could have been used to send the $1500, you would have still lost the funds. Likely in your case a fake ID was produced at the other end to pick up the funds.
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11-03-2009 @ 11:49PM
Mike S. said...
The real problems is not the MSB's, it's the agents, they must be better train and Review by the MSB's to make sure they are following Policies and Procedures in regard of AML.
This can happened to any other company, but are they all prepared? How often do they visit their agents and make sure they are Complying? Do they have a Compliance Field team?
Most companies just take care of these matters on the phone. Agents need to be train and follow up every year.
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12-01-2009 @ 9:27PM
NEEN said...
This is nothing my father 81 was just scammed out of $5,250.00 by western union. And nothing has been done about it either. He was called on the phone and told that he had won at the lottery but he had to put $5,250.00 into western union under one of his children's names.
They did not check any ID and the money was gone. I believe that the whole thing was a scam by the phone call and western union. It's all an inside job.
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