Money Transfer Giant to Pay $18M Fraud Settlement

From 2004 to 2008, federal officials say, MoneyGram ignored 41,103 fraud complaints from consumers who had lost at least $85 million to scams using its service. Law enforcement agencies also had repeatedly warned MoneyGram it had a fraud problem. But the company didn't just turn a blind eye, officials charge. They say MoneyGram agents also were in on the scams.

http://abcnews.go.com
October 21, 2009

Money Transfer Giant to Pay $18M Fraud Settlement
FTC Charged That MoneyGram Helped Fake Telemarketers Defraud Consumers Out of Millions of Dollars
Brian Hartman

MoneygramFTC.jpg

MoneyGram, the second largest U.S. money transfer service, will pay $18 million to settle charges by the Federal Trade Commission that it allowed fraud telemarketers to use its system to trick consumers. (ABC News Photo Illustration)

The second-largest money transfer service in the United States today agreed to pay $18 million to settle federal charges that it let consumers be duped into wiring tens of millions of dollars to con artists.

The Federal Trade Commission had charged that MoneyGram and its agents helped bogus telemarketers defraud consumers out of more than $84 million.

Most victims were tricked into believing they had won a lottery or some other prize that required payment of a collection fee. Others were told to send cash with the promise it would result in easy-credit loans or work.

From 2004 to 2008, federal officials say, MoneyGram ignored 41,103 fraud complaints from consumers who had lost at least $85 million to scams using its service. Law enforcement agencies also had repeatedly warned MoneyGram it had a fraud problem. But the company didn't just turn a blind eye, officials charge. They say MoneyGram agents also were in on the scams.

According to the FTC complaint, at least 65 MoneyGram agents in Canada "have been charged with, are currently being investigated for, or have otherwise been involved in, acting collusively in the frauds employing MoneyGram's money transfer system."

Such rip-offs have become a favorite ploy of criminals.

"Money transfers have increasingly become the payment method of choice for telemarketing scams that prey on U.S. consumers," the FTC complaint says. "Fraudulent telemarketers prefer to use money transfer services to facilitate their telemarketing scams because, among other reasons, they can pick up money transferred within as little as 10 minutes and, oftentimes, the payments are untraceable."

And the FTC charges MoneyGram failed to conduct background checks on its agents, didn't train them to prevent fraud and failed to fire agents who behaved suspiciously.

Federal officials say the "true scope" of fraud related to MoneyGram "greatly exceeds" the $84 million cited in charging documents because few consumers report fraud and the company has not kept track of all the complaints.

http://abcnews.go.com/Politics/moneygram-pay-18-million-charged-federal-trade-commission/story?id=8871729


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