In the largest settlement of it's kind involving a money service business, MoneyGram of Dallas, Texas has agreed to pay out $100 million dollars. This money will go to tens of thousands of victims across the United States who were defrauded in a scam involving MoneyGram.
Rather than be charged, MoneyGram International has admitted it criminally aided and abetted wire fraud.
In one of many different types of scams, victims received letters saying they were entitled to a lot of money. These letters, which weren't from MoneyGram, came with a check, which victims were to deposit. Then, they were told to wire thousands of dollars through MoneyGram. The problem: the checks always bounced while victims lost thousands of dollars of their own money.
The U.S. Attorney's office says from 2004 to 2009 Moneygram received more than 63,000 complaints about the scam but failed to act. Why? Because MoneyGram makes money on every transaction.
Under the terms of a deal with the U.S. Attorney's Office for the Middle District of Pennsylvania and the Department of Justice, MoneyGram has agreed to take steps to prevent future scams.
U.S. Postal Inspector Nick Alicea said, "We estimate the average victim lost $3,000 to $5,000 ... We know [of] loses of $100 million [that] could go as high as $500 million."
According to court documents, MoneyGram was involved in mass marketing and other scams, committed by corrupt agents and others, that defrauded tens of thousands of victims in the United States.
U.S. Attorney Kim Douglas Daniel said, "Thousands and thousands of people complained to the company that they were being ripped off and the company knew...and yet they failed to shut them down."
Assistant Attorney General Breuer took it a step further and said MoneyGram "knowingly turned a blind eye" to scam artists and money launderers who used the company for scams that targeted the elderly and other victims.
"Thousands of citizens in Pennsylvania and other states suffered heartbreaking financial losses for years because of these international telemarketing schemes which depended on MoneyGram's facilities to give them an electronic highway to move their illegal profits quickly out of the country," said Peter Smith, U.S. Attorney for the Middle District of Pennsylvania. "This case provides a way to get restitution for victims and ensure that MoneyGram does its part to deter similar scams in the future."
The Justice Department said that as part of the schemes, scam artists sometimes posed as victims' relatives in urgent need of money, falsely promised large cash prizes, or offered deeply discounted prices or employment to so-called "secret shoppers."
In each case, the victims were required to send funds through MoneyGram's money transfer system.
Despite thousands of complaints by customers from 2004 to 2009, prosecutors said MoneyGram not only failed to terminate agents it knew to be involved in scams, but violated federal law by processing thousands of transactions for the agents and profited from the scams by collecting fees and other revenues on the transactions.
The Justice Department will return the forfeited funds to the victims of the fraud schemes. Claims can be filed by calling the Victim Asset Recovery Program at 1-877-282-2610 or by visiting the U.S. Justice Department website at www.justice.gov/criminal/vns/caseup.