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.
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 the schemes. The FTC alleges that MoneyGram ignored warnings from law enforcement officials and even its own employees, claiming that dealing with the problem was too costly and 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.
“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.” Con artists like to use money transfer services because they can pick up transferred money immediately, the payments are often untraceable, and victimized consumers have no chargeback rights or other recourse.
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.
Details on the MoneyGram case and how to apply for redress are available online at ftc.gov.
The FTC also released a new consumer alert called Money Transfers Can Be Risky Business. It includes useful information on how consumers can avoid telemarketing and money transfer fraud.
BBB and the FTC offer the following tips.
Don’t wire money to:
- Someone you don’t know.
- Someone claiming to be a relative in the midst of a crisis, but wants to keep the request for money a secret.
- Someone who says a money transfer is the only acceptable form of payment.
- Someone who asks you to deposit a check and send some of the money back.
For more tips to recognize and avoid fraud, visit bbb.org.