Attorney General Coakley Reaches Agreement with MoneyGram Resolving Concerns Regarding Fraudulent Wire Transfer Services

FROM THE OFFICE OF THE ATTORNEY GENERAL

July 02, 2008

Contact:
Emily LaGrassa
Melissa Karpinsky
(617) 727-2543


BOSTON - Today, Massachusetts Attorney General Martha Coakley’ s Office, along with 43 other states and the District of Columbia, entered into a settlement agreement with MoneyGram Payment Systems, Inc., (MoneyGram) resolving concerns about the use of the company’s wire transfer services by fraudulent telemarketers. According to the settlement agreement, MoneyGram will fund a $1.1 million national consumer awareness program to educate consumers on dangers of fraud-induced wire transfers and will prominently display consumer warnings on the forms used by consumers to wire money. The consumer program will be governed by a separate agreement between MoneyGram and the AARP Foundation. The agreement is still subject to approval by the states.

Attorney General Coakleynoted the importance of enlisting “third parties” like MoneyGram in the campaign against consumer fraud. “To keep perpetrators from defrauding consumers, it is important to establish controls that enable money transfer services like MoneyGram to monitor potential fraudulent transfers,” said Attorney General Coakley. “Agreements like this one with MoneyGram—with its model fraud warning, consumer education program, and enhanced training for money transfer agents—are steps in the right direction.”

MoneyGram, based in Minneapolis, Minnesota, offers money transfer services by wire at over 25,000 locations in the United States and over 100,000 locations around the world, including grocery stores, gas stations and other retail businesses. Independent contractors offering MoneyGram services are located in 135 cities and towns in Massachusetts.

The problem addressed by the settlement agreement is the high number of “fraud-induced transfers”— money wired by consumers to fraudulent telemarketers and other scam artists. For example, some telemarketers, often based in other countries, use a “lottery” scam, in which they tell vulnerable consumers they have won a large sum of money but must pay taxes or other charges in order to claim the winnings. The victims are then directed to send the money by wire, because wire transfers are fast, there are transfer agents in most communities, and funds can be picked up in multiple locations. The states’ investigation focused on the concern that MoneyGram did not do enough to warn elders of the risk of fraud, and the fact that MoneyGram took insufficient action to stop fraud in locations where it was happening.

According to the settlement agreement, over the past several years, the states have observed that fraudulent parties in and outside the United States, through unfair and deceptive practices in violation of state and federal law, have induced many American consumers to use a number of methods to send them money, including wire transfers via MoneyGram.

The settlement also states that among the consumers who have lost money through these fraud-induced transfers are senior citizens who are victims of contest and lottery scams, and people of limited financial means who are victims of advance-fee credit card and loan scams.

Today’s agreement displays a commitment by MoneyGram and the states to protect consumers from fraud-induced wire transfers through a program that includes prominent consumer warnings at MoneyGram retail agent locations, nationwide consumer education, agent training, closure of problem agent locations, interdictions of high-risk transfers, and sharing of complaint information with the states.

Under the terms of today’s agreement, MoneyGram must:

Display prominent warnings to consumers of the dangers of fraud-induced wire transfers in English and Spanish on the front page of MoneyGram’s Send Form. Comparable warnings are required for telephone and Web transfers. The warning is to occupy at least 40 percent of the area of the Send Form’s front page. Pay $1.1 million for a national consumer education program on how to avoid fraud-induced transfers, to be overseen by the AARP Foundation. Continue its current policy of reimbursing the amount of any transfer to a consumer who requests, prior to pickup, that the transfer be stopped, and reimbursing transfer fees as well if the consumer reasonably claims that the transfer was fraud-induced. Send prominent anti-fraud messages to its agents electronically every month or whenever a proposed transfer exceeds a certain amount, revise and enhance the company’s agent anti-fraud training programs, and provide special training to agents with elevated fraud levels at their locations. Take appropriate action to suspend or terminate agent locations that are involved in fraud or that do not take reasonable steps to reduce fraud. Block wire transfers from specific consumers or to specific recipients when the company receives information from a state that there are good faith grounds to believe that fraud will occur, until such time as the consumer is counseled on fraud and requests resumption of the transfer. Ensure that money transfers sent from the United States can only be picked up in the country designated by the sender, with a potential extension of this policy to the state or provincial level if the pickup of fraud-induced transfers in states or provinces to which consumers do not intend to send money becomes a significant problem in the future. Pay litigation costs in the amount of $150,000 to be shared among the negotiating states of Arkansas, Illinois, Massachusetts, New Jersey, North Carolina, Ohio, Texas, Vermont and Washington.

Joining Massachusetts in today’s agreement are: Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia and Wyoming, and the District of Columbia.