Did MoneyGram “Look the Other Way” When Fraudulent Use Was Obvious?

October 22, 2009
The Federal Trade Commission announced on October 20, 2009 that MoneyGram International, Inc. has agreed to $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 has also committed to implement a comprehensive anti-fraud and agent-monitoring service to curtail future fraudulent wire transfers of money.

The Federal Trade Commission announcement, along with links to the FTC complaint, is available at http://ftc.gov/opa/2009/10/moneygram.shtm.

The statistics and allegations in the FTC complaint paint a picture that appears to show that the company may have chosen to “look the other way” when fraudulent use of its wire transfer system should have been obvious.  For example:

  • MoneyGram itself received more than 20,600 fraud complaints from consumers whose wired funds had been stolen.
  • In 2008, only 11% of MoneyGram’s agents (131 of 1,200 agents, according to the FTC) accounted for 95% of the fraud complaints received by the company.
  • A Federal Trade Commission survey conducted over four months in 2007 found that at least 79% of all MoneyGram wire transfers of $1,000 or more from the United States to Canada were fraud-induced.

According to the Federal Trade Commission news release earlier this week, “MoneyGram ignored warnings from law enforcement 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 or not the company’s responsibility.”

But it gets worse.  According to the FTC, “The company even discouraged its employees from enforcing its own fraud prevention policies or taking action against suspicious or corrupt agents.”  The FTC alleges that “some employees who raised concerns were disciplined or fired.”

In most of the cases studied by the Federal Trade Commission, con artists had used counterfeit checks and convinced consumers to send money from the checks back to the fraudsters by wire transfer.  The most frequent basis for these wire transfers were three schemes well known to the Better Business Bureau:  fraudulent lottery or prize schemes; advance fee loan scams; and, mystery shopping scams.