MoneyGram agrees $125million settlement with FTC re fraud charges

The Federal Trade Commission (FTC) and Department of Justice (DOJ) today announced a settlement in a long-standing case against MoneyGram over the use of its wire service by fraudsters.

For many years, money transfers have been a preferred payment method for scammers. In 2009 the FTC sued MoneyGram for failing to address fraud-induced money transfers in its system.

In 2017, a similar case was brought against MoneyGram’s main competitor, Western Union, which paid $586 million to settle the charges.

In 2018 FTC and DOJ filed against MoneyGram again for failing to live up to its end of the 2009 deal. Today’s settlement is in response to those latest charges.

As part of the 2009 settlement MoneyGram had been required to improve its anti-fraud measures. Specifically that required : (1) implementing a comprehensive anti-fraud program to protect consumers; (2) conducting due diligence on prospective agents; (3) investigating problematic agents and disciplining or terminating them as appropriate; and (4) sharing consumer complaints with the FTC.

This year though FTC claimed that MoneyGram had failed to accomplish any of those agreed actions. As a result, scammers kept using MoneyGram’s system to collect millions of dollars from victims.

In particular, between 2004-2008 MoneyGram’s customers lost more than $84 million. The FTC charged that MoneyGram knew its system was being used for fraud but did very little about it, and that some agents actually participated in the fraud.

Moreover, not only did the company’s electronic system for spotting and blocking fraud-induced transfers suffer serious technical problems, resulting in even greater consumer losses, the company also hired agents who had been terminated from Western Union for their role in fraud-induced transfers.

FTC further claimed that MoneyGram didn’t properly investigate or discipline agents who were responsible for high volumes of fraud complaints, and had different standards for when to take disciplinary action against large “chain” agents with 10 or more locations, allowing the company to focus its disciplinary efforts instead on lower-volume “mom and pop” agents instead.

Last, it was charged that the company didn’t record all of the consumer complaints it received and didn’t share all of the complaints it did record with the FTC.

The FTC’s court filing says that “[i]nformation contained in MoneyGram’s own records demonstrates that it has been aware for years of high levels of fraud and suspicious activities involving particular agents.” Annual consumer fraud complaints to MoneyGram more than doubled between 2012 and 2016.

Now MoneyGram has committed, in a revised order, to address its deficiencies and improve its anti-fraud program. It will block transfers of known fraudsters and provide refunds to people when agents haven’t complied with applicable policies and procedures. It will also pay $125 million in refunds to consumers who used MoneyGram to pay a scammer.

That money will eventually go back to people who wired – and lost – money to a scammer through MoneyGram starting in 2013. The date range and process for eligible refund requests will be announced later.

"Over the past several years, we have taken significant steps to improve our compliance program and have remediated many of the issues noted in the agreements." said Alex Holmes, MoneyGram's chairman and chief executive officer in a released statement.

"We will continue to bolster our compliance program to ensure it meets the highest industry standards and advances our goal of providing increased protection for all consumers. We remain steadfast in our efforts to partner with law enforcement and regulators to prevent our systems from being used to perpetrate fraudulent activity."

MoneyGram stated that since 2012 it has implemented new verification standards that have prevented approximately $1.5 billion in fraudulent transactions.

MoneyGram operates some 350,000 agent locations in more than 200 countries worldwide. It maintains a network of 308 locations in 81 cities across Oklahoma including 58 locations in Oklahoma City.