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MoneyGram Settles FTC Charges for $18 Million

A money transfer company that allowed fraudulent telemarketers to rip off thousands of consumers has settled Federal Trade Commission (FTC) charges and has been ordered to pay $18 million in consumer redress. According to FTC charges, MoneyGram International, Inc., the second-largest money transfer company in the U.S., knew that their service was being utilized to defraud consumers and did very little to stop it, and in some cases, its agents in Canada even participated in these schemes.

The complaint charges MoneyGram with violating both the FTC Act and the FTC’s Telemarketing Sales Rule by helping sellers or telemarketers who it knew – or consciously avoided knowing – were violating federal law, and for not taking adequate steps to prevent fraud.

The FTC charged that between 2004 and 2008, MoneyGram helped fraudulent telemarketers and other con artists who tricked consumers into wiring more than $84 million within the United States and to Canada. The scam artists duped consumers by telling them that they had won a lottery, were hired for a secret shopper programs, or were guaranteed loans. The FTC says that actual amount lost is likely to be much higher than the $84 million that consumers reported to MoneyGram.

According to the FTC’s complaint, MoneyGram knew, or avoided knowing, that only about 11% (131 out of more than 1,200) of its agents accounted for over 95% of fraud complaints it received in 2008 regarding money transfers to Canada. In 2006, a similarly small percentage of agents were also responsible for over 96% of fraud complaints.

“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.”

Minneapolis, Minnesota-based MoneyGram operates through a worldwide network of approximately 180,000 agent locations in 190 countries and territories. In its complaint, the FTC charged that in recent years this network has increasingly been used by telemarketing scammers to prey on U.S. consumers. 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 charge-back rights or other recourse.

The FTC said that in 2007, 72% of all complaints received by the agency for Canadian-based fraud involved using money-transfer services to make payments. And according to a recent FTC survey cited in the complaint, at least 79% 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.

In many of the scams that involved a MoneyGram wire transfer, the con artists used a counterfeit check to trick consumers into sending back money by wire transfer. In the "secret shopper" scam, con artists sent consumers a check to deposit in their checking account and directed the consumer to send most of the money back using a money transfer at Wal-Mart. By the time the check bounced and consumers realized they'd been had, the the money transfer agents had already received and paid out the money, often either without checking IDs or by using fake drivers license information.

The most common scam involved "lottery winnings" that could only be collected by prepaying "taxes," "customs fees," or "insurance" to a third party. Consumers paid the fee using MoneyGram, but never received their "winnings."

A similar scam preyed on consumers by promising they could receive a loan regardless of their credit score. But before receiving their "loan" proceeds, the consumer was directed to pay advance fees for "insurance," "processing," or "paperwork." After paying the fees and not receiving the loan as promised, the consumer would realize that the loan offer was a scam.

The FTC’s complaint alleges that 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 company even discouraged its employees from enforcing its own fraud prevention policies or taking action against suspicious or corrupt agents. Some employees who raised concerns were disciplined or fired, the FTC charged.

In addition, at least 65 of MoneyGram’s Canadian agents have been charged by Canadian or U.S. law enforcers with, or are currently being investigated for, colluding in fraud schemes that used the MoneyGram system.

The agreed-upon court order settling the FTC’s charges bars MoneyGram from knowingly providing substantial help or support to any sellers or telemarketers that are violating the Telemarketing Sales Rule. MoneyGram is also required to implement a comprehensive anti-fraud program, which includes conducting background checks on prospective agents; educating and training its employees about consumer fraud; agent monitoring; and disciplining agents who don’t comply with the rules, as well as maintaining a system for handling fraud complaints and providing the FTC with that information upon request.

MoneyGram is also ordered to provide a clear and conspicuous fraud warning on the front of all its money transfer forms. The order’s conduct provisions apply to all MoneyGram money transfers sent worldwide from either the United States or Canada.

The FTC says to protect yourself against fraud, don’t wire money to:
  • someone you don’t know, in the U.S. or in a foreign country
  • someone claiming to be a relative in the midst of a crisis and who wants to keep therequest for money a secret
  • someone who says a money transfer is the only form of payment that’s acceptable
  • someone who asks you to deposit a check and send some of the money back
The FTC is the nation's consumer protection agency against fraudulent, deceptive, and abusive business practices.

Consumers interested in the process of redress administration should call 202-326-3755 .

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Wednesday, 05 August 2020

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