MoneyGram International Inc. (MGI:US), a provider of cash transfers worldwide, agreed to forfeit $100 million to resolve U.S. charges that some of its agents defrauded customers.
The forfeiture is part of a deferred-prosecution agreement between the Dallas-based company and the U.S. Attorney’s Office in Harrisburg, Pennsylvania, MoneyGram said today in a statement. Prosecutors will withdraw criminal charges if MoneyGram complies with the agreement for five years, according to papers filed in federal court in Harrisburg.
The settlement stems from an investigation from 2003 to 2009 into transactions involving MoneyGram’s U.S. and Canadian agents, as well as its fraud-complaint data and consumer anti- fraud program, the company said. MoneyGram will appoint an independent compliance monitor under the agreement.
“We take compliance very seriously at MoneyGram, and nothing angers us more than when our services are used to perpetrate illegal activity,” Chief Executive Officer Pamela Patsley said in the statement.
MoneyGram knew as early as 2003 that its agents were involved in a scheme to trick victims into sending money through participating outlets, prosecutors said in court documents.
Victims were promised they would receive lottery winnings, fictitious loans and large cash prizes. The scheme also involved offering high-ticket items for sale over the Internet at deep discount and posting jobs for “secret shoppers,” according to court documents. Victims were then directed to send advanced payments to fake payees using MoneyGram, the government said.
Prosecutors alleged that MoneyGram agents knowingly entered false addresses and telephone numbers for these transactions into the company’s database. The agents then subtracted their own fees for their role in completing the fake transactions, according to court papers.
Customers filed more than 63,000 consumer fraud reports claiming more than $128 million in losses in the U.S. and Canada from 2004 to 2009, the government said. MoneyGram’s fraud department recommended terminating numerous agents and outlets suspected of fraud as early as 2003, recommendations that were rarely accepted, according to court documents.
Patsley said the company has invested (MGI:US) more than $84 million in compliance programs since 2009. MoneyGram that year paid $18 million to the Federal Trade Commission, which distributed the money to victims of the fraud scheme, according to today’s statement.
The case is U.S. v. MoneyGram International Inc., 1:12- 00291, U.S. District Court, Middle District of Pennsylvania (Harrisburg)
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