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Blog: MoneyGram To Pay $13 Million To Resolve Fraud Investigation

By Jim Donovan:  MoneyGram has agreed to pay a $13 million settlement to resolve a multistate investigation involving consumer fraud.  The investigation focused on complaints of consumers who used MoneyGram's wire transfer service to send money to third parties who were involved in schemes to defraud consumers.

This action was filed in the form of an assurance of voluntary compliance and has two main components. First, MoneyGram has agreed to pay a total of $13 million to the participating states to fund a nationwide consumer restitution program. Part of that sum also will cover the states' costs and fees associated with the investigation.

Second, MoneyGram has agreed to maintain and continue to improve a comprehensive and robust anti-fraud program designed to help detect and prevent consumers from suffering financial losses as a result of these types of fraud-induced wire transfers. The program must be documented in writing and, at a minimum, must include the following elements:

  • Mandatory documented compliance training for agents.
  • Specific guidelines regarding when an agent's conduct warrants suspension or termination.
  • Suspension or termination of agents who fail to take commercially reasonable steps to reduce fraud-induced money transfers.
  • A hotline system — telephonic and electronic — in which employees and agents can report noncompliance with anti-fraud measures.
  • Sound mechanisms to evaluate actual fraud rates and consumer losses from fraud-induced money transfers.
  • Continued enhancement of technology solutions, including an Anti-Fraud Alert System (AFAS).

The settlement provides for an independent third party settlement administrator who will review MoneyGram records and send notices regarding restitution to all consumers who are eligible to receive restitution under this settlement. Generally, consumers who are eligible for restitution previously filed complaints with MoneyGram between July 1, 2008 and Aug. 31, 2009 regarding fraud-induced transfers sent from the U.S. to foreign countries other than Canada.

MoneyGram Payment Systems, Inc. is a subsidiary of MoneyGram International Inc., which is headquartered in Dallas. MoneyGram provides services that enable consumers to transfer money to outlets throughout the world. It has a global network of approximately 350,000 locations where its agents send and receive money transfers.

Here are a few examples of scams that may involve money transfers:

  • Grandparent scheme – a fraudster calls a grandparent claiming that money is urgently needed and must be wired to assist with a grandchild's emergency (e.g. emergency medical assistance, travel money or bail money).
  • Foreign lottery scam – a fraudster tells the consumer that she has won a lottery or contest but must wire money to cover "fees" "taxes" or other charges.
  • Romance scam – a fraudster creates a fake online profile using someone else's picture – sometimes even using stolen pictures of real military personnel. Once they make contact with a prospective victim, they quickly profess love and proceed to ask that money be wired to them – because their wallet was stolen or they have some other heart tugging emergency.
  • Employment and business opportunity scams – scammers offer work at home opportunities, such as mystery shoppers, but require that the consumer first wire money to them.
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