MoneyGram hit with $18 million fine for looking the other way while consumers got scammed

MoneyGram International, Inc., has agreed to pay $18 million to settle federal charges that the money transfer service allowed itself to be a conduit for con artists who allegedly bilked people out of tens of millions of dollars.

The money will be used to help consumers recoup some of their losses, the Federal Trade Commission said. MoneyGram is also being required to install an anti-fraud program and monitor its agents, the FTC said.

According to the FTC, between 2004 and 2008, MoneyGram agents helped criminals make away with $84 million wired to Canada and around the U.S.

Having money sent by a wire transfer service is a common method used in a variety of scams, mainly those requiring an upfront payment to participate. Consumers likely lost considerably more, the FTC said.

Despite being aware its system was being used for fraudulent transactions, MoneyGram did little to stop it, the FTC alleged.

"Money transfer services have a responsibility to make sure their systems don't become conduits to rip people off," David C. Vladeck, director of the FTC's Bureau of Consumer Protection, said in a statement. "In this case, MoneyGram not only ducked this responsibility, but also looked the other way while its agents took part in the scams."

A small number of agents were involved in the overwhelming majority of fraud cases, but the company did nothing to address that, the FTC said. A significant number of the cases were cross-border, with money sent from the U.S. to Canada.

An estimated eight of every 10 MoneyGram transfers of $1,000 or more from the United States to Canada over a four-month period in 2007 were fraud-induced, according to the FTC.

MoneyGram issued a statement expressing its commitment to policing its system.

"At MoneyGram, we take the issue of consumer fraud very seriously. Our ability to provide safe and reliable money transfer services for our consumers is critically important," Pamela H. Patsley, MoneyGram chairman and CEO, said in the statement. "MoneyGram has committed extraordinary resources to building a state-of-the-art consumer anti-fraud program."

MoneyGram also took issue to the FTC allegations that the company allowed the fraud to perpetuate.

"While we don't agree with the FTC's allegations regarding our fraud prevention in the past, we can agree on fraud prevention today and in the future," Patsley said. "We don't want our customers being victimized by third-party fraud. What we are announcing ... our commitment to enhance our already comprehensive efforts to combat fraud and ensure our customers can continue to rely on MoneyGram for safe, reliable money transfer services."
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