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<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Sunday, November 8, 2009 MoneyGram shows the risks of wiring funds By Michelle Singletary Washington Post Writers Group In one of the largest consumer payouts of its type, MoneyGram International Inc. has agreed to fork over $18 million to the Federal Trade Commission to settle charges that it knowingly allowed its operation to be used by con artists to swindle U.S. consumers out of millions of dollars. “This is a pretty significant amount of money to return to consumers,” said FTC Chairman Jon Leibowitz. The money the FTC is getting from MoneyGram will go directly to provide relief to victims. If you’ve been one, call 202-326-3755. The payout will be on a pro rata, or calculated, basis. The FTC is still working on how to verify claims and when people will be paid. The FTC alleged that MoneyGram knew that its system was being used to defraud people but didn’t do enough about it, and that in some cases MoneyGram agents actually participated in the schemes. The FTC said that from 2004 and 2008, telemarketers and others using MoneyGram’s system convinced consumers to wire them more than $84 million. And that’s just what people reported they lost. “They (MoneyGram) were involved in facilitating all these transfers,” Leibowitz said in an interview. “It was easier to go after them than the individual scammers.” MoneyGram did not admit to any wrongdoing. “We do not want to get into discussions about the individual allegations made by the FTC,” Lynda Michielutti, MoneyGram’s director of corporate communications, wrote to me. “Suffice to say, we do not agree with the FTC’s claims.” Michielutti said the company’s anti-fraud department has stopped millions in frauds and worked closely with authorities. Crooks use a number of schemes that involve money transfers through companies such as Western Union and MoneyGram, the FTC says. Money transfers are virtually the same as sending cash. Once you make a transaction, there is no way you can reverse it or trace the money. The FTC said a survey found that at least 79 percent of all MoneyGram transfers of $1,000 or more from the United States to Canada over a four-month period in 2007 were fraud-related. In one type of money wire scheme, someone receives a notice that he or she has won thousands of dollars in a lottery. But to collect the money, the person is told to pay a fee for taxes or customs, or to have a third party collect the winnings. In another twist on this con, someone is told they are being hired to visit stores to evaluate MoneyGram money transfer operations. In this elaborate ruse, the con artists send consumers a cashier’s check, telling them to deposit it in their checking account, and then send most of the money back using a money transfer location. Initially, the check might clear. But later when the victim’s bank discovers the deception, the person is on the hook for the fraudulent check. This type of fraud nearly hit home for Leibowitz. He said someone called his mother claiming she had won a $1 million lottery. Leibowitz said when his mother told the person she wanted to check with her son, who works for the FTC, the caller hung up. The FTC’s complaint alleges that MoneyGram disregarded warnings from law enforcement officials and even its own employees that rampant fraud was being conducted over its network. As part of the settlement, MoneyGram agreed to beef up its anti-fraud program. The FTC said the company must conduct background checks on prospective agents; educate and train its employees about consumer fraud; institute agent monitoring; and discipline agents who don’t comply with the rules. The order also requires MoneyGram to provide a clear and conspicuous warning on the front of all its money transfer forms. Michielutti said that, among other things, the company has more than doubled the size of its anti-fraud department and has developed new consumer-fraud training for its agents and employees. “The more our employees know about the latest scams affecting our business and hurting our customers, the better prepared they are to be champions in helping to fight this criminal activity,” Michielutti said. “If there is one message that could come out of this it’s that consumers should be very skeptical of someone who wants them to do a wire transfer,” Leibowitz said. The safest action: Don’t wire money to someone you don’t know. Washington Post Writers Group READER COMMENTS Be the first to comment. You must be a registered user and verify your e-mail address to post comments to blogs or articles on HeraldNet. To register, click here. To read other terms and conditions, click here. Log out

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