Office of the Attorney General: Settlement with MoneyGram will help fight wire transfer fraud through $1.1 million consumer awareness program

FROM THE OFFICE OF THE ATTORNEY GENERAL

July 02, 2008

Jefferson City, Mo. - A Minnesota company that provides money transfer services to hundreds of thousands of locations around the world will fund a $1.1 million national consumer awareness program under a multi-state agreement with Attorney General Jay Nixon, 43 other states and the District of Columbia. Missouri is part of the assurance of voluntary compliance with MoneyGram Payment Systems, Inc., reached in response to concerns about the use of the company's wire transfer services by fraudulent telemarketers. The agreement was filed today in Cole County Circuit Court.

MoneyGram, based in Minneapolis, 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.

At issue in the settlement was the high number of "fraud-induced transfers," or 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 to claim their 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.

Nixon says the problem of fraud-induced transfers is substantial. In 2003, a survey conducted by seven states concerning transfers of over $300 to Canada by another major money transfer company estimated that over 29 percent of those transfers were fraud-induced, resulting in consumers losses in the year 2002 of approximately $113 million nationally.

"To keep perpetrators from defrauding consumers, we need to make it harder for them to utilize traditional methods of transferring money," Nixon said. "Agreements such as 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."

According to today's agreement, MoneyGram has agreed to:

Pay $1.1 million for a national consumer education program on how to avoid fraud-induced transfers, to be overseen by the AARP Foundation; Post prominent warnings to consumers in both English and Spanish on the dangers of fraud-induced wire transfers on the front page of MoneyGram's Send Form, with comparable warnings for telephone and Web transfers; 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; and Ensure that money transfers sent from the U.S. can only be picked up in a 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 future problem. Nixon and 46 other Attorneys General reached a similar agreement with Western Union Financial Services in November 2005, in which the company agreed to fund a program aimed at educating consumers that wire transfers are often sent by victims of scams.