FTC Settles Canadian Wire Fraud Case for $18 Million

When 82-year old Louise Precht got a call from someone who said he was her grandson asking her to wire him $5,000 to get out of jail in Canada, she just wanted to help. But when he called back asking for another $5,000, "a light bulb went off," the Illinois resident said. "I asked him what was his grandfather’s first name. There was silence. He hung up." But the first $5,000 was gone.

Precht, speaking at a press conference at the Federal Trade Commission today, was one of 41,000 consumers in recent years who complained to MoneyGram International Inc. about wire fraud.

At today’s press conference, the FTC announced that MoneyGram would pay $18 million in consumer redress to settle charges that company agents helped con artists trick U.S. consumers into wiring at least $84 million to Canada between 2004 and 2008.The Minneapolis-based company, which is the second-largest money transfer service in the United States, is also required to institute a comprehensive anti-fraud and employee-monitoring program.

FTC Consumer Protection Bureau head David Vladeck stressed that “MoneyGram knew what was going on, but took no action…. They were warned by their own internal fraud department that something was dangerously amiss. But they took no action other than to profit from the ongoing scams.”

The most common type of fraud described by the FTC was telling consumers they’d won the lottery or a prize, but needed to pay a fee via wire transfer to receive their winnings. Also popular – promising a loan, but requiring an up-front processing fee to be wired, or offering someone a job as a “secret shopper,” which also entailed wiring cash.

According to the FTC, the fraudulent transactions were associated with about 10% of MoneyGram’s Canadian agents, who let the con artists use fake or non-existent identification to pick up the wired money and allowed them to come back multiple times each day. At least 65 agents in Canada have been charged with or are currently being investigated for fraud.

In a statement, MoneyGram chairman and CEO Pamela Patsley said, "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. We don't want our customers being victimized by third-party fraud."

MoneyGram was represented by William MacLeod, Lewis Rose and Jennifer Ngai of Kelley Drye & Warren in Washington. In the settlement, MoneyGram said it was entering the order “solely for the purpose of settlement and nothing contained herein may be taken or construed to be an admission or concession of any violation of law.”

(Vladeck at the press conference countered, “If MoneyGram felt any of the allegations were incorrect, they shouldn’t have settled the case.”)

The FTC sued MoneyGram in U.S. District Court for the Northern District of Illinois on Oct. 19 for violations of the Federal Trade Commission Act, and the FTC’s Telemarketing Sales Rule.

The settlement requires MoneyGram to conduct background checks on prospective agents; educate and train its employees about consumer fraud; institute agent monitoring; and discipline agents who don’t comply with the rules. The order also requires MoneyGram to provide a clear and conspicuous fraud warning on the front of all its money transfer forms.

Comments

[Jeff Silverstein]

I am a journalist in Toronto working for an investigative television program called W5 that airs on the CTV network. I am currently researching a story about "grandparent fraud" - scams where a person calls a senior pretending to be a grandson, or granddaughter. I'd be interested in speaking with those who have knowledge of this crime.

Many thanks.

Jeff Silverstein
W5
CTV
416-384-6595
[email protected]

[Laura L.]

What about the people who lost money in 2009? Does this count with Moneygram and FTC or not since article mentions 2004 - 2008?

[Pat Smith]

A friend had this happen through our local Western Union office, and the funds went to a small town in Canada. When she thought better of it, she returned to the office (about 10 minutes later), where the WU clerk said, "Yeah, when it's to Canada, most of them are crooks. Once they pick up the money, you lose. They are gone."
Why, if a clerk thinks this is occuring, say nothing? These are elderly, for their grandchildren.