Maine Joins Agreement With Western Union Over Fraud-Induced Transfers

December 29, 2005

Attorney General Steve Rowe announced today that Maine has joined 46 other states and the District of Columbia in an agreement with Western Union Financial Services, Inc., aimed at preventing the use of the company's wire transfer services by fraudulent schemers. Western Union will, among other things, fund an $8.1 million national consumer awareness program and set out very prominent consumer warnings on the forms used by consumers to wire money. Western Union Financial Services is a wholly-owned subsidiary of First Data Corporation, based in Greenwood Village, Colorado.

The agreement seeks to prevent the high number of "fraud-induced transfers": money wired by consumers to fraudulent telemarketers, email solicitors, and other scam artists. A common example is a "lottery" scam, in which scammers tell vulnerable consumers that they have won a large sum of money but must pay taxes or other charges in order to claim the winnings. The victims are then directed to send the money by wire because wire transfers 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. Based on a survey conducted by seven states, it was estimated that over 29 percent of Western Union transfers in excess of $300 from the U.S. to Canada were fraud-induced, representing 58 percent of the total dollars transferred and an average of over $1,500 per transfer. Total American consumer losses to Canada in the year 2002 alone were estimated at $113 million.

In response to these findings, states began to negotiate an agreement with Western Union that would provide prominent warnings to consumers who transfer money by wire, education of high-risk consumers, and changes in company practices.

Among the terms of the Agreement just reached are:

  • Prominent warnings to consumers of the dangers of fraud-induced wire transfers must appear in English and Spanish on a new front page of Western Union's Send Form, and comparable warnings are required for telephone and Web transfers.
  • Western Union will pay $8.1 million over five years for national peer-counseling programs to be overseen by the AARP Foundation and designed to reach at least 3 million consumers.
  • Western Union will reimburse the amount of any transfer plus fees to any consumer who requests, prior to pickup, that a transfer be stopped and who reasonably claims that the transfer was fraud-induced.
  • Western Union will send monthly anti-fraud emails to its agents, revise the company's agent training video and manual, and provide enhanced training to agents with elevated fraud levels at their locations.
  • Western Union will terminate agents who are involved in fraud, and suspend or terminate agents who do not take reasonable steps requested by Western Union to reduce fraud.
  • Western Union will block wire transfers from specific consumers or to specific recipients when Western Union receives information from a state that there is reason to believe that fraud will occur, until such time as the consumer is counseled on fraud and requests resumption of the transfer.
  • Western Union will pay $400,000 in costs to be shared among the negotiating states of Arkansas, Massachusetts, New Jersey, New York, North Carolina, Ohio, Texas, Vermont, Washington and Wisconsin.

Attorney General Rowe underscored the importance of enlisting "third parties" like Western Union in the fight against consumer fraud. Rowe said, "Western Union is doing the right thing by trying to prevent their service from being used to perpetrate fraud. We encourage other businesses to think about ways they can prevent fraud, especially against the elderly."

Rowe said, "An elderly man from rural Maine came in the office just last week, having lost around $130,000 to foreign lottery scammers over the past few months, some of it using Western Union. Everyone reading these words should tell their vulnerable loved ones that these foreign lotteries are scams."