FTC settlement emphasizes the need to be careful when wiring money
In one of the largest consumer payouts of its type, MoneyGram International Inc. has agreed to fork over $18 million to the Federal Trade Commission to settle charges that it knowingly allowed its operation to be used by con artists to swindle US consumers out of millions of dollars.
“This is a pretty significant amount of money to return to consumers,’’ said FTC chairman Jon Leibowitz.
The money the FTC is getting from MoneyGram will go to provide relief to victims. If you’ve been one, call 202-326-3755.
The FTC alleged that MoneyGram knew that its system was being used to defraud people but didn’t do enough about it, and in some cases MoneyGram agents participated in the schemes.
The FTC said that from 2004 and 2008, telemarketers and others using MoneyGram’s system convinced consumers to wire them more than $84 million within the United States and to Canada. And that’s just what people reported they lost. The actual amount could be much higher.
MoneyGram did not admit to any wrongdoing. “We do not want to get into discussions about the individual allegations made by the FTC,’’ Lynda Michielutti, MoneyGram’s director of corporate communications, wrote to me. “We do not agree with the FTC’s claims.’’
Michielutti said the company’s antifraud department has stopped millions in frauds and worked closely with authorities. “However, we believed that it was in the best interest of our company and our consumers to put this matter behind us and focus our resources on delivering our valued service to consumers rather than battling it out through a long and costly trial,’’ she said.
Crooks use a number of schemes that involve money transfers, the FTC says. Money transfers are virtually the same as sending cash. Once you make a transaction, there is no way you can reverse it or trace the money.
In one scheme, someone receives a notice that he or she has won thousands of dollars in a lottery. But to collect the money, the person is told to pay a fee for taxes or customs. In another twist, someone is told they are being hired to visit stores to evaluate MoneyGram money transfer operations.
The FTC’s complaint alleges that MoneyGram disregarded warnings from law enforcement officials and even its own employees that rampant fraud was being conducted over its network.
As part of the settlement, MoneyGram agreed to beef up its antifraud program. The company must conduct background checks on prospective agents; educate 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 warning on the front of money transfer forms.
The safest action: Don’t wire money to someone you don’t know.
Michelle Singletary is a columnist for The Washington Post. She can be reached at singletarym@washpost.com. 
