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July 2, 2008

MoneyGram Agrees to Help Thwart "Wire Transfer Scams"

Miller warns consumers to beware of a growing number of schemes that ask victims to wire money to con artists

(DES MOINES) MoneyGram has agreed to take steps aimed at reducing the growing number of consumer fraud schemes that rely on wire transfers to fleece U.S. consumers.

“All kinds of scams ask consumers to wire money,” said Iowa Attorney General Tom Miller. “The money usually goes abroad, it can’t be traced, and it’s gone in a flash. Consumers often lose several thousand dollars, there’s no way to get the money back, and there’s no way to catch the crooks. We have to prevent wire-transfer scams before the money is sent,” he said.

MoneyGram Payment Systems, Inc., based in Minneapolis, has agreed with Miller and other state attorneys general to a battery of measures to help thwart “fraud-induced transfers.” Go to MoneyGram agreement with states.

MoneyGram will set out very prominent consumer warnings on forms used by consumers to wire money, fund a $1.1 million national consumer awareness program, train its agents to identify and help block scam-induced transfers, and refund consumer’s fees and the money sent if a consumer suspects a fraud before the transfer is picked up.

MoneyGram has over 25,000 U.S. locations that offer money transfer services, including at grocery stores, gas stations and other businesses, and over 100,000 locations around the world.

“These steps by MoneyGram will help stop many fraud-induced wire transfers at the crucial moment when consumers are set to lose their money,” Miller said. MoneyGram entered into an Assurance of Voluntary Compliance or AVC with the attorneys general of 44 states and the District of Columbia. Western Union entered a similar agreement in November 2005.


More background and detail:

The problem:

“There are more and more schemes that deceive victims into wiring large sums, and usually to Canada and abroad,” Miller said. Phony international lotteries are a prime example, he said. “People may receive a call or mailing indicating they have won a huge lottery or sweepstakes prize and they simply have to wire $3,000 or $4,000 to pay for so-called taxes or other fees.” People also might 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 that they have to repay the bank. Victims often lose thousands of dollars,” he said.

Miller said a survey conducted by seven states several years ago shows the problem of fraud-induced transfers is substantial -- especially transfers to Canada and abroad. The survey estimated that over 29 percent of 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.

Tips for consumers:

“Consumers need to protect themselves,” Miller said.

  • 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.
Terms of the agreement between MoneyGram and state attorneys general include:

Prominent warnings to consumers of the dangers of fraud-induced wire transfers must appear in English and Spanish on the front page of MoneyGram’s Send Form, and 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.

  • MoneyGram will pay $1.1 million for a national consumer education program on how to avoid fraud-induced transfers, to be overseen by the AARP Foundation.
  • MoneyGram will 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.
  • MoneyGram will 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.
  • MoneyGram will take appropriate action to suspend or terminate agent locations that are involved in fraud or that do not take reasonable steps to reduce fraud.
  • MoneyGram will 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.
  • MoneyGram will ensure that money transfers sent from the United States can be picked up only 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.

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