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Better Business Bureau ®
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Central South Carolina and Charleston
MoneyGram to Pay $18 Million to Settle FTC Charges That it Allowed its Money Transfer System To Be Used for Fraud
October 21, 2009

MoneyGram International, Inc., the second-largest money transfer service in the United States, will pay $18 million in consumer redress to settle FTC charges that the company allowed its money transfer system to be used by fraudulent telemarketers to bilk U.S. consumers out of tens of millions of dollars. MoneyGram also will be required to implement a comprehensive anti-fraud and agent-monitoring program.

The FTC charged that between 2004 and 2008, MoneyGram agents helped fraudulent telemarketers and other con artists who tricked U.S. consumers into wiring more than $84 million within the United States and to Canada – after these consumers were falsely told they had won a lottery, were hired for a secret shopper program, or were guaranteed loans. The $84 million in losses is based on consumer complaints to MoneyGram – actual consumer losses likely are much higher. 

In many of the scams that used MoneyGram’s money transfer system, the con artists used counterfeit checks to induce consumers to send money back by wire transfer. The most prevalent of these scams were lottery or prize schemes in which consumers were told they had won thousands of dollars and just had to pay a fee for “taxes,” “customs,” or “insurance” to a third-party to collect their winnings. Consumers paid the fee using MoneyGram, but received nothing. In another scheme, telemarketers told consumers they were guaranteed loans, regardless of their credit score. All they had to do was pay “insurance,” “paperwork,” or “processing” fees to complete the transaction. Consumers who sent funds using a money transfer service got nothing in return.

In mystery shopping scams, the con artists called U.S. consumers or sent them a piece of direct mail in which they claimed to be hiring consumers to visit stores such as Wal-Mart to evaluate MoneyGram money transfer operations. The con artists sent consumers a cashier’s check, telling them to deposit it in their checking account and then send most of the money back using a money transfer at Wal-Mart. When the counterfeit checks bounced, consumers realized they had lost the money they transferred. By this time, however, 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 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.

The FTC has a new Consumer Alert, available on its Web site at http://ftc.gov/bcp/edu/pubs/consumer/alerts/alt034.shtm, titled “Money Transfers Can Be Risky Business.” It includes useful information on how consumers can avoid telemarketing and money transfer fraud, including the following tips. 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 the
    request for money a secret;
  • someone who says a money transfer is the only form of payment that’s acceptable; or
  • someone who asks you to deposit a check and send some of the money back.

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