A statement released by the U.S. Federal Trade Commission says,
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.
While this is only a fraction of the money stolen by fraudsters using MoneyGram and Western Union transfers, it is a start. (You can read more about the mystery shopper scam here.)
I spoke to representatives of both Western Union and MoneyGram a while back about what they were doing to prevent fraud. The answer, although they claimed otherwise, turned out to be, “not very much.” It also appears now that, at least in the case of MoneyGram, in some cases their agents were active participants in the scams. According to the FTC:
The FTC charged that MoneyGram knew that its system was being used to defraud people but did very little about it, and that in some cases its agents in Canada actually participated in these schemes. According to the FTC’s complaint, MoneyGram knew, or avoided knowing, that about 131 of its more than 1,200 agents accounted for more than 95 percent of the fraud complaints it received in 2008 regarding money transfers to Canada; a similarly small number of agents was responsible for more than 96 percent of all fraud complaints to the company in 2006.
This settlement not only requires MoneyGram to pay $18 million to be used in consumer redress, they also have to change their practices and more closely monitor complaints and agents involved in questionable transactions.
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 and requires it to implement a comprehensive anti-fraud program. Under the anti-fraud program, MoneyGram must conduct background checks on prospective agents; educate and train its employees about consumer fraud; institute agent monitoring; and discipline agents who don’t comply with the rules. The order also requires MoneyGram 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 order contains monitoring and discipline provisions that will ensure MoneyGram is properly training, monitoring, and taking actions to address problems related to its agents. To do this, the order requires MoneyGram to develop and maintain a system for receiving consumer complaints and data, and to provide that information to the FTC upon request. MoneyGram also must take all reasonable steps to identify agents that are involved in fraud. It must review its transaction data to identify any unusual or suspicious activity by its agents and fire any agent who it believes may be participating in fraudulent activities. It also must fire or suspend any agent who has not taken appropriate steps to stop fraudulent money transfers.
This is certainly good news for those of us who are working to educate the public about these scams. Let’s hope that the actions required by the FTC help in some way to reduce the incidence of this fraud. Unfortunately, fraud will never go away, but if some potential victims are saved from the scammers, it is a victory for the good guys.
If you were a victim of one of these scams, the FTC says you should call 202-326-3755 to learn about claiming redress funds.