CHICAGO (CN) – MoneyGram International will pay $18 million to settle FTC charges that it let con artists to use its money transfer system to bilk consumers of $84 million. The FTC says the company looked the other way despite receiving more than 41,000 complaints of fraud, from customers and from its own employees.
In its federal complaint, the Federal Trade Commission claimed that “fraudulent telemarketers and other con artists” told victims they had won a lottery, or had been guaranteed a loan or were hired to be “secret shoppers.” They persuaded the victims, many of whom were elderly, to wire money through MoneyGram as “fees” or to become a mystery shopper, then waltzed with the money, the FTC says. The victims’ “payments often exceed $1,000 per transaction,” according to the complaint.
The FTC claims MoneyGram was aware that certain “corrupt” agents helped scammers carry out the fraudulent schemes, and that some of its agents ran schemes themselves.
The FTC says a “discrete” group of Canadian agents are responsible for most of the frauds, and that “at least 65” of them “have been charged with, are currently being investigated for, or have otherwise been involved in” fraud using MoneyGram’s transfer system.
MoneyGram’s own records show that some of its Canadian agents repeatedly paid money to people who used fake identification or no ID at all, the FTC says.
MoneyGram does not conduct proper criminal background checks on its agents, fails to train them and does not do regular audits on vulnerable locations, such as high-crime areas, the FTC claims.
The FTC says MoneyGram also hired agents who had been fired from Western Union for fraud, and that it was warned by law officials that certain Canadian agents “appeared to be either complicit or directly involved in the telemarketing scams.” MoneyGram’s own employees made it aware of suspicious activity, yet the company “failed to take appropriate corrective actions,” and looked the other way. MoneyGram discouraged employees from wasting time and money on prevention, and even fired some employees who spoke up about management’s failure to prevent fraud, the FTC says.
Between 2004 and 2008, MoneyGram received more than 41,000 fraud complaints from U.S. customers, who lost at least $84 million. This represents only about 25 percent of actual consumer complaints, the FTC said. It added that MoneyGram did not log all the complaints it received.
MoneyGram is the second largest money transfer service in the United States.
In addition to the $18 million in “consumer redress,” MoneyGram must “implement a comprehensive anti-fraud and agent-monitoring program,” the FTC said.