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November 18, 2005

Miller: Beware of Wire Transfers to Scams

Western Union agrees to help thwart 'fraud-induced wire transfers,' and to pay $8.1 million for a consumer awareness program

(DES MOINES) Attorney General Tom Miller today warned consumers not to fall prey to a growing number of scams that induce victims to wire money to con-artists -- and he applauded a new agreement with Western Union that will help thwart many "fraud-induced wire transfers."

"It's a disaster when a victim wires money to a con-artist," Miller said. "It usually goes abroad, it cannot be traced, and the money is gone in a flash. Usually it's for a large amount of money, and victims often are older or low-income Iowans. Usually, we can't get their money back and we can't catch the crooks," he said. "We have to prevent the scam in the first place."

Miller said the agreement between states and Western Union will help. The company has agreed to post prominent consumer warnings on the forms used to wire money, to train its agents to identify and help block scam-induced transfers, and to refund consumer's fees and the money sent if a consumer suspects a fraud before the transfer is picked up.

Western Union also agreed to pay $8.1 million for a nationwide peer-counseling program to be overseen by the AARP Foundation and designed to reach 3 million vulnerable consumers.

"This is a huge step," Miller said. "The Western Union agreement will help stop fraud-induced wire transfers at the crucial moment when consumers are set to lose their money," he said.

"There are more and more schemes that deceive victims into wiring large sums, and usually abroad," Miller said. "People may receive a call or mailing indicating they have won a huge lottery or sweepstakes prize and they simply have to wire money to pay for so-called taxes or other fees. They may be promised a large loan or credit card, but first have to pay certain fees or so-called insurance. People may even be approached in an on-line chat room and asked to send money to help someone get to the U.S.," he said.

"We think the fastest growing form of scam now involves counterfeit cashier's checks and money orders ending up with wire transfers," Miller said. "Victims may receive a cashier's check or postal money order for some reason and be asked to deposit it and wire part of the money, only to learn the check is counterfeit -- and they have to repay the bank. Victims often lose thousands of dollars," he said.

Miller said a Des Moines woman recently wired $2,741.12 abroad after she received a letter indicating she had won a $100,000 sweepstakes prize. The letter contained a cashier's check, which was supposedly to cover taxes, fees, and insurance. She deposited the check, received the money, and wired the money abroad via Western Union, Miller said. When the check turned out to be counterfeit, the bank came back to the victim for the money. "And she didn't win any sweepstakes," he said.

"Consumers need to protect themselves," Miller said. He listed several tips for consumers:

  • Don't wire money to a stranger
  • Don't wire money abroad unless you know the recipient.
  • Don't be rushed into wiring money
  • Beware of phony cashier's checks or money orders
  • Beware of foreign lotteries and phony "prizes"
  • Beware of any "advance fee" payment for loans, credit cards, jobs, prizes, etc.

Miller said a survey conducted by seven states shows the problem of fraud-induced transfers is substantial -- especially transfers to Canada and abroad. The survey estimated that over 29 percent of Western Union transfers exceeding $300 from the U.S. to Canada were fraud-induced. Such transfers averaged over $1500 each and represented 58 percent of the total dollars transferred. In 2002 alone, total American consumer losses to Canada were estimated at $113 million.

Western Union Financial Services is based in Greenwood Village, Colorado. It offers money transfer services by wire at over 40,000 locations in the U.S. and over 195,000 locations worldwide, including at supermarkets, gas stations, drug stores, and other businesses. Western Union agents are independent contractors.

The agreement between Western Union and a total of 47 states was reached this week.

Under the agreement, Western Union will:

  • Display prominent warnings in English and Spanish on the front page of its "Send Form" about the dangers of fraud-induced wire transfers. Similar warnings will be given to persons who initiate transfers by telephone or on-line.
  • Pay $8.129 million to fund a national peer-counseling program with "reverse boiler rooms" overseen by the AARP Foundation, designed to reach 3 million consumers over five years. The program aims to contact and warn vulnerable consumers, such as recent scam victims.
  • Reimburse the principal and transfer fees to any consumer who requests, prior to pickup, that a transfer be stopped, and who reasonably claims the transfer was fraud-induced.
  • Circulate monthly anti-fraud e-mails to Western Union outlets, revise its outlet training video and manual to stress the issue of fraud-induced transfers, and provide enhanced training to personnel who work at locations known to have a high level of fraud-induced transfers.
  • Block transfers from specific consumers or to specific recipients when Western Union receives information from a state that there is reason to believe that fraud will occur, until the consumer is counseled on fraud and requests resumption of the transfer.
  • Transmit consumer complaint information to requesting states.
  • Increase its staff who combat telemarketing fraud and work to develop a computerized system to spot likely fraud-induced transfers before they are completed.


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