FTC Slams MoneyGram for $18 million for Aiding Telemarketing Fraud

MoneyGram International will pay $18 million in consumer redress to settle FTC charges that the company allowed its money transfer system to be used by fraudulent telemarketers to bilk U.S. consumers out of millions of dollars. The settlement comes as part of the FTC's continuing campaign to hold legitimate companies such as payment processors, list brokers, and others responsible if they help facilitate telemarketing wrongdoing.

Under the Telemarketing Sales Rule, persons who provide goods or services to telemarketers have an affirmative obligation to use due diligence to assure that the promotion that they are assisting is reasonably compliant. Otherwise, they can be held responsible for the underlying wrongdoing.

Here, MoneyGram was charged with knowing or avoiding knowing that its facilities were being used to have payments sent to Canada for allegedly phony lottery or prize schemes in which consumers were told that they had won thousands of dollars and just had to pay a fee for "taxes" "customs" or "insurance" to get their winnings. In other instances, consumers were told that they had been awarded loans and had to forward necessary fees, but received nothing in return. The FTC charged that MoneyGram had been alerted to the fact that various frauds were being perpetrated, but ignored the warnings because proposals to deal with the problem were too costly or "were not their problem". Marketers and those who provide goods and services to telemarketers are learning the hard way that it is indeed their problem.

In settling the FTC action, in addition to paying $18 million, MoneyGram is barred from knowingly providing substantial help or support to any sellers or telemarketers that are violating the Telemarketing Sales Rule. The court order requires the company to implement a comprehensive anti-fraud program. Under the anti-fraud program, MoneyGram must conduct background checks on prospective agents; educate and train its employees about consumer fraud; institute agent monitoring; and discipline agents who fail to 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. The order's conduct provisions apply to all MoneyGram money transfers sent worldwide from either the United States or Canada. MoneyGram is also required to develop and maintain a system for receiving consumer complaints and data, and to provide that information to the FTC upon request. MoneyGram also must take all reasonable steps to identify agents that are involved in fraud. It must review its transaction data to identify any unusual or suspicious activity by its agents and fire any agent who it believes may be participating in fraudulent activities. It also must fire or suspend any agent who has not taken appropriate steps to stop fraudulent money transfers.

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