MoneyGram scam: Always be sure you know to whom you’re wiring money

Fort Worth Star-Telegram – November 6, 2009

By DAVE LIEBER

MoneyGram, one of America’s best-known money-transfer companies, is reeling from charges made by the federal government that 10 percent of its Canadian sales agents were in cahoots with criminals scamming money from Americans.

Last month, MoneyGram agreed to repay $18 million to U.S. customers who wired money to Canada not knowing they were being conned by organized theft rings.

The Federal Trade Commission says Canadian agents for MoneyGram are tied to various scams defrauding Americans who sent money to strangers believing they:

Won a lottery or sweepstakes.

Were hired as a mystery shopper.

Made Internet purchases.

Fell for scams involving loans, romance and employment ads, as well as the “grandparents scam,” which lured people into thinking they were wiring money to stranded grandchildren in Canada.

FTC spokesman Mitchell Katz says that scam is among the most evil because it preys on the elderly, many of whom already face financial troubles.

“They play on their emotions and financial insecurity to trick them out of their money, and that’s just not right,” Katz says. “That’s why we thought this was such a great case.”

The allegations against Minnesota-based MoneyGram go far deeper into the corporate culture than crooked agents.

The FTC charges that management was warned repeatedly about criminal activity in its midst and chose to do nothing.

FTC spokesman Katz tells The Watchdog: “Businesses have to keep in mind that you can’t just look the other way and pretend it’s not happening. You need to have a compliance program in place to make sure that the people working for you and doing your business are complying with the law.”

In response to Watchdog questions, MoneyGram spokeswoman Lynda Michielutti released a statement:

“We don’t agree with the allegations made by the FTC. But we believed that it was in the best interest of our company and our consumers to put this matter behind us and focus our resources on delivering our valued service to consumers rather than battling it out through a long and costly trial.”

The FTC allegations:

Since 2004, MoneyGram agents helped fraudulent telemarketers and other con artists trick consumers into wiring at least $84 million within the U.S. and also to Canada.

About 134 of MoneyGram’s 1,200 agents in Canada accounted for more than 95 percent of the fraud complaints received last year.

Con artists favor MoneyGram because they can pick up the money immediately, payments are often untraceable, and victims have no recourse.

In one month alone, the FTC says, 8 in 10 MoneyGram wire transfers of $1,000 or more were fraudulent.

MoneyGram, the FTC says, “ignored warnings from law enforcement officials 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 and were not the company’s responsibility.”

“The company even discouraged its employees from enforcing its own fraud detection policies or taking action against suspicious or corrupt agents,” the FTC says. “Some employees who raised concerns were disciplined or fired.”

So far, 65 Canadian and U.S. employees of MoneyGram have been charged with crimes by law enforcement agencies in the two countries.

Under the settlement, MoneyGram must pay $18 million to victims and make the following changes:

Conduct background checks on all employees.

Educate its employees on consumer fraud.

Monitor its agents.

Discipline those who break rules.

Provide a clear fraud warning on its money-transfer forms

Maintain a system for receiving consumer complaints that federal agents can periodically review.

Michielutti, the MoneyGram spokeswoman, says the company has already beefed up its anti-fraud programs.

“Today, less than one-half of 1 percent of MoneyGram’s total transactions represents fraud-induced money transfers,” she says.

The FTC says the settlement is one of the largest agreed to by any company in recent years.

“This is right up there with the big ones,” Katz says.

The Watchdog column appears Fridays and Sundays. Dave Lieber, Star-Telegram

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