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February 11, 2016

Iowa Joins 49 State Settlement with MoneyGram

Agreement addresses nationwide money transfer fraud complaints by requiring improved  anti-fraud efforts and restitution for some consumers

(DES MOINES, Iowa) Dallas-based MoneyGram Payment Systems Inc. will improve its efforts to combat money transfer fraud and pay restitution to some consumers through a $13 million agreement with attorneys general in 49 states, including Iowa, and the District of Columbia.

The settlement, through an assurance of voluntary compliance, resolves a multistate investigation that focused on complaints from consumers who used MoneyGram’s money transfer service to send funds to third parties involved in schemes to defraud consumers.

“Money is the lifeblood for scammers and criminals, and this agreement is part of our ongoing efforts to address a significant source of illicit funding,” Attorney General Tom Miller said. “The agreement requires MoneyGram to do a lot more to combat fraud.”

Ongoing Nationwide Problem
For years, local, state and federal consumer protection and criminal investigators have fielded complaints from consumers who reported being scammed by criminals who convinced them to wire funds through money transfer services including MoneyGram. Criminals are often able to pick up wired funds worldwide before their victims realize they’ve been scammed. The criminals most often conduct the scams from overseas. Payments are difficult, if not impossible, to reverse once collected, and the criminals behind the transactions are difficult to trace.

Most Common Scams
One of the most commonly reported money transfer scam is the “grandparent scam,” in which a caller begs the recipient to wire funds to help with an emergency, while impersonating as a grandchild, other relative or friend.

Other common money transfer scams include the lottery and contest scams, where victims are told they must first wire a fee to collect winnings; apartment rental scams, dating scams, and overpayment scams, where someone uses a check to overpay for something and requests the victim to wire the difference; and the IRS scam, where criminals impersonate IRS employees and demand that the recipient immediately wire payment for a supposed tax debt or fine.

“Once a victim wires money, it’s like handing over cash and there’s generally little we can do,” Miller said. “That’s why we’re trying to get MoneyGram to do more on the front end, including better safeguards.”

Settlement Requires Better Anti-Fraud Efforts
The settlement requires MoneyGram to maintain and improve a comprehensive anti-fraud program designed to help detect and prevent consumers from suffering financial losses as a result of these types of fraud-induced money transfers. Under the agreement, MoneyGram must:

  • Conduct mandatory and documented compliance training for agents and adopt guidelines regarding when an agent’s conduct warrants suspension or termination.
  • Suspend or terminate agents who fail to take commercially reasonable steps to reduce fraud-induced money transfers.
  • Create a telephone and online hotline system where employees and agents can report noncompliance with anti-fraud measures.
  • Evaluate actual fraud rates and consumer losses from fraud-induced money transfers in order to use that information to improve compliance.
  • Deploy and enhance technology solutions, including its existing Anti-Fraud Alert System (AFAS).

Consumer Restitution
MoneyGram will pay $13 million to fund a nationwide consumer restitution program and to reimburse the states’ costs, including monitoring and future agreement enforcement.

Generally, consumers who are eligible for restitution must have filed complaints with MoneyGram or the Attorney General’s Consumer Protection Division between July 1, 2008 and August 31, 2009 regarding fraud-induced money transfers to foreign countries other than Canada. An independent settlement administrator will review MoneyGram records and contact eligible consumers by mail.

Consumers with questions about the settlement will find more information at www.MoneyGramSettlement.com.

Past Enforcement Efforts
In 2012, MoneyGram admitted in federal court to criminally aiding and abetting wire fraud, and failing to maintain an effective anti-money laundering program. According to court documents, MoneyGram was involved in mass marketing and consumer fraud phishing schemes, perpetrated by corrupt MoneyGram agents and others, that defrauded tens of thousands of victims nationwide. The company forfeited $100 million in the case.

In 2008, MoneyGram entered an agreement with attorneys general in 44 states and the District of Columbia that required the company to take steps to reduce fraud-induced transfers.

Consumer Advice

  • In these types of scams, scammers use the phone to seek immediate payment through money transfer services (such as MoneyGram and Western Union) and also prepaid debit cards (such as a Green Dot card).
  • Beware of calls urging you to wire money for an emergency involving a family member or friend. Scammers want you to act immediately, which is why it is so important to independently verify the circumstances.
  • If someone claims the only acceptable form of payment is a money transfer, that’s a red flag.
  • If you receive a check and are asked to wire a portion of the funds, it’s a scam.
  • If someone claims you won a lottery or contest but must first wire any type of payment, it is not legitimate.
  • If you think you’ve been victimized by a money transfer scam, contact the Federal Trade Commission (FTC) at www.ftc.gov or call 877-382-4357.
  • If you have questions or would like to report the scam to the Attorney General’s Consumer Protection Division, contact us:

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