FTC nabs MoneyGram in fraud case

Herb Weisbaum • Profile • E-mail

The Federal Trade Commission has settled a huge case aimed at slowing the flow of money unwittingly wired to con artists.

The FTC had charged MoneyGram International, the second-largest money transfer service in the United States, with allowing fraudulent telemarketers to use its system to bilk American consumers out of tens of millions of dollars.

MoneyGram did not admit doing anything wrong in last week’s settlement, but agreed to pay $18 million in refunds to consumers who were tricked into transferring money to crooks – most of them in Canada – and to change the way it does business to prevent future consumer fraud.

In its complaint, the FTC charged that between 2004 and 2008, MoneyGram agents helped wire at least $84 million to con artists within in the United States or Canada. During that time MoneyGram received more than 41,000 fraud complaints from customers in the U.S.

"We allege they knew or consciously avoided knowing what was going on,” says Steven Baker, director of the FTC’s Midwest Regional Office, which prosecuted this case.

In a news release, MoneyGram says it does not agree with the FTC’s allegations. CEO Pamela Patseley is quoted as saying, “At MoneyGram, we take the issue of consumer fraud very seriously. We are committed to be vigilant in our efforts in protecting our customers from fraudulent activity.”

The FTC says at least 65 Canadian MoneyGram agents have been criminally charged with, or are being investigated for, “colluding in fraud schemes” that used the MoneyGram system.

In settling this case, MoneyGram agreed to establish a comprehensive anti-fraud program. The company will carefully screen prospective agents to weed out any bad apples. It will also train agents to spot potential fraud and monitor them to look for patterns of suspicious activity.

Con artists get the money
Many of the scams that used wire transfer services involve the use of fake checks. The problem is huge with tens of thousands of victims each year. I’ve been warning you about these scams for years. (See As economy worsens, fake check scams spread and Counterfeit checks an Internet menace.)

One victim's story Wire transfer scams are not limited to phony contests and work-at-home opportunities. Sometimes they get personal. Earlier this year, Marlene Holman, who lives near Olympia, Wash., got stung when she received a call from someone claiming to be her grandson. “He said he was in big trouble,” Holman, 74, recalls. “It didn’t sound quite like him, but he was crying and it was a bad cell connection.” The con artist in Canada said he’d been drinking, was in an accident and was calling from jail in Vancouver, British Columbia. He needed $3,900 wired right away to pay his bail. An accomplice who pretended to be a police officer verified this false story. Unable to reach her grandson’s parents, Holman got the money and went to MoneyGram. She remembers specifically telling the MoneyGram employee what she was doing, but she wasn’t warned it was probably a scam. Mrs. Holman is still angry at MoneyGram. She feels let down and wants to warn others to be on guard.

Here’s how it works: The scammer sends you a counterfeit check and tells you to deposit it. You’re then told to wire most of the money back to them.

The storyline varies from con to con. Sometimes it starts with a prize notice that comes in the mail that says you’ve won a contest or lottery. To claim your millions you need to deposit the enclosed check (anywhere from $4,000 to $9,000) and wire off most of the money to cover taxes or other required fees.

Other victims are snagged by bogus ads for mystery shoppers. When they get “hired” they’re sent a check for thousands of dollars and told to cash it and transfer most of the money via MoneyGram or Western Union as part of their first assignment.

Of course, you don’t know you’re dealing with international thieves or that the check is a fake – until your bank tells you it bounced and erases the deposit from your account.

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