Settlement with MoneyGram to crack down on wire fraud: Wire service required to better detect scams, pay refunds to fraud victims

Settlement with MoneyGram to crack down on wire fraud: Wire service required to better detect scams, pay refunds to fraud victims

By / State News / الأربعاء, 17 شباط/فبراير 2016 05:00

RALEIGH, N.C. : February 11th, 2016 - Scammers should have a harder time taking money from fraud victims under a settlement with wire service MoneyGram, North Carolina Attorney General Roy Cooper announced Feb. 11th.
Under a settlement with North Carolina, 48 states and the District of Columbia, MoneyGram Payment Systems, Inc. has agreed to do more to stop its wire service from being used to send money to scammers and will pay a total of $13 million for consumer refunds and investigative costs.
“In the hands of a criminal, a wire service can be used like a crowbar to pry money from unsuspecting fraud victims,” Cooper said. “Making it harder for fraud rings to use wire transfers puts another barrier between scammers and consumers’ wallets.”

How scammers use MoneyGram

The settlement resolves a multistate investigation into the use of MoneyGram’s wire transfer service by third parties to defraud consumers.  The investigation found that victims in the U.S. wired millions of dollars to scammers usually based in Jamaica, Nigeria, Spain and the United Kingdom via MoneyGram. Approximately half of all senior fraud victims who report having sent money to scammers used a wire service to do so, according to reports to Cooper’s Consumer Protection Division.
Criminals who run international telemarketing fraud rings often direct their victims to use wire services such as MoneyGram to send them funds, which they can then pick up anywhere in the world. Victims have wired money to scammers posing as grandchildren in need of emergency funds for legal or medical help, lottery officials who demand payment of taxes before they can deliver a promised prize, and banks offering advance fee credit cards, loans and grants.

For example:
• A North Carolina man in his 70s reported just this week that he sent $990 by MoneyGram wire transfer to pay taxes on what he thought was a Publishers Clearing House sweepstakes prize of nearly $1 million. Instead, the money went to scammers in Jamaica.
• Last month, family members of a senior from eastern North Carolina reported that he sent $35,000 to scammers via MoneyGram and other payment methods, thinking it would help him claim a prize he’d been told was worth millions of dollars.
• A woman in her 60s in western North Carolina said she couldn’t afford the $299.99 fee to claim her promised lottery prize, so the scammers convinced her to serve as a money mule. She received nearly $10,000 from other victims via MoneyGram which she then sent to scammers in Jamaica.
• A senior from near Charlotte lost approximately $90,000, much of it sent via MoneyGram, to sweetheart scammers who posed on dating websites as American businessmen working overseas.
• Believing he had won more than $1 million and a new car, a Greenville man sent tens of thousands of dollars to lottery scammers, including at least $13,850 via MoneyGram.
“My office works hard to warn consumers about scams and how to avoid them, but con artists are very clever and creative at convincing their victims to pay them money,” Cooper said. “Any amount of North Carolinians’ hard-earned money sent to overseas scammers is too much, and this settlement should help stop many of these kinds of transfers from going through.”
Settlement to help prevent fraud
Under the settlement, MoneyGram will beef up its efforts to detect and prevent consumers from wiring money to scammers. MoneyGram has agreed to maintain and continue to improve its anti-fraud program, which must be documented in writing and include:
• Mandatory compliance training for all agents;
• Suspension or termination of agents who fail to take reasonable steps to reduce money transfers to scammers;
• A hotline where employees and agents can report noncompliance with measures to fight fraud;
• Tracking actual fraud rates and consumer losses and using that data to improve compliance; and
• Improved technology, including its Anti-Fraud Alert System.
The Federal Trade Commission recently banned legitimate telemarketers from accepting payments via wire which should make it clearer for MoneyGram and Western Union to detect fraudulent telemarketers who continue to try to use wire transfers.
“Con artists like payments that are tough to trace and hard for people to reverse,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “The FTC’s new telemarketing rules ban payment methods that scammers like, but honest telemarketers don’t use.”
The Telemarketing Sales Rule (TSR) changes will stop telemarketers from dipping directly into consumer bank accounts by using certain kinds of checks and “payment orders” that have been “remotely created” by the telemarketer or seller. These two payment mechanisms make it easy for unscrupulous telemarketers to debit bank accounts without consumers’ permission, and can make it difficult to reverse the transactions with consumers’ banks.
In addition, the amendments will bar telemarketers from receiving payments through traditional “cash-to-cash” money transfers – provided by companies like MoneyGram, Western Union, and RIA.
The TSR changes also will prohibit telemarketers from accepting as payment “cash reload” mechanisms – such as MoneyPak, Vanilla Reload, or Reloadit packs used to add funds to existing prepaid cards.

MoneyGram to pay $13 million to consumers and the states

MoneyGram has agreed to pay a total of $13 million to fund a nationwide consumer restitution program and to cover the cost of the investigation and enforcement action.
Approximately $9,175,000 of the settlement will go to eligible consumers who sent money to scammers via MoneyGram prior to the company implementing measures to prevent fraud. Consumers who filed complaints with MoneyGram between July 1, 2008 and August 31, 2009 about money transfers sent from the U.S. to scammers in foreign countries other than Canada may be eligible for refunds. An independent settlement administrator will review MoneyGram records and send notices to all consumers eligible for refunds under the settlement.  More information is available at the Settlement Administrator’s website,
The remaining $3,825,000 will go to the participating states to cover the costs of the investigation, legal action and settlement negotiations. North Carolina will receive $210,000 for its role as a member of the Executive Committee that negotiated the settlement.


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