MoneyGram Agrees to Pay $9.2 Million in Refunds to Victims of Wire Fraud

MoneyGram Agrees to Pay $9.2 Million in Refunds to Victims of Wire Fraud
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February 12, 2016

MoneyGram will pay a total of $13 million for consumer refunds and other costs as part of a settlement with North Carolina and 48 other states. The company will also do more to beef up its efforts against wire fraud.

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.

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.

The targets for these types of scams are often senior citizens. According to the North Carolina Attorney General's Office, about half of all senior fraud victims who report having sent money to scammers used a wire service to do so.

Under the terms of the settlement, MoneyGram will increase 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.

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.

About $9.175 million 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, MoneyGramSettlement.com.

The remaining $3.825 million 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.

The Federal Trade Commission (FTC) recently banned legitimate telemarketers from accepting payments via wire, which should make it easier for MoneyGram and similar services, like Western Union, to detect fraudulent telemarketers who continue to try to use wire transfers to scam consumers going forward.