Attorney General Colberg Announces Settlement with MoneyGram
July 2, 2008
(Anchorage, AK) Alaska Attorney General Talis Colberg announced today that MoneyGram Payment Systems, Inc. has entered into an Assurance of Voluntary Compliance with Alaska and 43 other states and the District of Columbia, in response to concerns about the use of the company's wire transfer services by fraudulent telemarketers. Under the Assurance, MoneyGram will fund a $1.1 million national consumer awareness program and include prominent consumer warnings on the forms used by consumers to wire money.
MoneyGram, based in Minneapolis, offers money transfer services by wire at over 25,000 locations in the United States and over 100,000 locations around the world, including grocery stores, gas stations and other retail businesses.
The terms of the Assurance are meant to address the problem of "fraud-induced transfers"-- money wired by consumers to fraudulent telemarketers and other scam artists. A common example of a fraud-induced transfer is the lottery scam. Scam artists convince vulnerable consumers they have won a large sum of money in a lottery but must pay taxes or other charges in order to claim the winnings. The victims are directed to send the payment by wire, because wire transfers are fast, there are transfer agents in most communities, and funds can be picked up in multiple locations. But there are no winnings and instead the victims are defrauded of the money they wired.
The problem of fraud-induced transfers is substantial. In 2003, a survey conducted in seven states of transfers over $300 to Canada by another major money transfer company estimated that over 29 percent of those transfers were fraud-induced, resulting in consumer losses in the year 2002 of approximately $113 million nationally.
Under the Assurance, MoneyGram will, among other things:
- Include warnings to consumers of the dangers of fraud-induced wire transfers in English and Spanish on the front page of MoneyGram's Send Form, and require comparable warnings for telephone and Web transfers.
- Pay $1.1 million for a national consumer education program on how to avoid fraud-induced transfers, to be overseen by the AARP Foundation.
- Send prominent anti-fraud messages to its agents electronically every month or whenever a proposed transfer exceeds a certain amount, and revise its anti-fraud training programs for its agents.
- 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.
- Ensure that money transfers sent from the United States can only be picked up in the country designated by the sender. This policy may be extended 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.
For questions about the Assurance, please contact Assistant Attorney General Cynthia Drinkwater at (907) 269-5200.
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