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Maine Joins Settlement to Protect Consumers From Fraud Induced Wire Transfers
July 2, 2008
Maine Attorney General Steve Rowe announced today that MoneyGram Payment Systems, Inc., has entered into an Assurance of Voluntary Compliance (AVC) with Maine and 43 other States and the District of Columbia. The agreement is in response to concerns about the use of the company’s wire transfer services by fraudulent telemarketers. Under the AVC, MoneyGram will, among other things, fund a $1.1 million national consumer awareness program and display highly visible consumer warnings on the forms used to wire money by consumers.
MoneyGram, based in Minneapolis, offers money transfer services by wire at 31 locations in Maine and more than 25,000 locations in the United States, including grocery stores, gas stations and other retail businesses.
“Maine people work too hard to have their money stolen by scam artists. These thieves use convincing tactics to exploit people’s sense of charity or dreams of winning a lottery,” Rowe said. “Many of the scams involve wire transfers. This agreement will help raise awareness of these scams and put in place anti-fraud measures to protect potential victims. “
The problem addressed by the agreement is the high number of “fraud-induced transfers”—that is, money wired by consumers to fraudulent telemarketers and other scam artists. For example, some telemarketers, often based in other countries, use a “lottery” scam, in which they tell vulnerable consumers they have won a large sum of money but must pay taxes or other charges in order to claim the winnings. Another common tactic taken by telemarketers is to pretend to be from a charity and to seek donations to what sounds like a worthy cause. Victims are then directed to wire the money to a designated location.
Wire transfers are a preferred method of payment by scam artists because they are fast, there are transfer agents in most communities, and funds can be picked up in multiple locations.
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.
Among the terms of the AVC just reached with MoneyGram are these:
• Prominent warnings to consumers of the dangers of fraud-induced wire transfers must appear in English and Spanish on the front page of MoneyGram’s Send Form, and comparable warnings are required for telephone and Web transfers. The warning is to occupy at least 40 percent of the area of the Send Form’s front page.
• MoneyGram will pay $1.1 million for a national consumer education program on how to avoid fraud-induced transfers, to be overseen by the AARP Foundation.
• MoneyGram will continue its current policy of reimbursing the amount of any transfer to a consumer who requests, prior to pickup, that the transfer be stopped, and reimbursing transfer fees as well if the consumer reasonably claims that the transfer was fraud-induced.
• MoneyGram will send prominent anti-fraud messages to its agents electronically every month or whenever a proposed transfer exceeds a certain amount, revise and enhance the company’s agent anti-fraud training programs, and provide special training to agents with elevated fraud levels at their locations.
• MoneyGram will take appropriate action to suspend or terminate agent locations that are involved in fraud or that do not take reasonable steps to reduce fraud.
• MoneyGram will 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.
• MoneyGram will ensure that money transfers sent from the United States can only be picked up in the country designated by the sender, with a potential extension of this policy 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.
• MoneyGram will pay $150,000 to be shared among the negotiating states of Arkansas, Illinois, Massachusetts, New Jersey, North Carolina, Ohio, Texas, Vermont and Washington.
Commenting on the AVC, Attorney General Rowe noted the importance of enlisting “third parties” like MoneyGram in the campaign against consumer fraud. “MoneyGram is doing the right thing by trying to prevent their service from being used to perpetrate fraud.” Rowe said. ”Agreements like this one—with its model fraud warning, consumer education program, and enhanced training for money transfer agents—are steps in the right direction.”
Signing the AVC were the States of Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia and Wyoming, and the District of Columbia.
NEWS RELEASE July 2, 2008 Jim McKenna, AAG, 626-8842