MoneyGram on Nov. 8 entered into agreements with the U.S. Department of Justice and the Federal Trade Commission concerning previously disclosed compliance failures that resulted in a widespread money-laundering fraud scheme.
In November 2012, MoneyGram agreed to forfeit $100 million and enter into a deferred prosecution agreement (DPA) with the Justice Department to resolve criminal charges for aiding and abetting wire fraud and failing to maintain an effective anti-money laundering program in violation of the Bank Secrecy Act.
According to court documents, MoneyGram processed thousands of transactions for its own agents known to be involved in an international scheme that defrauded tens of thousands of members of the U.S. public out of at least $100 million. MoneyGram profited from the scheme by collecting fees and other revenues on the fraudulent transactions from 2004 to 2009.
In connection with the agreements, which are subject to court approval, MoneyGram will amend and extend the original DPA, dated Nov. 9, 2012, by and between the company and the Department of Justice. The DPA will be extended for 30 months. MoneyGram said it will also modify its consent order with the FTC.
Additionally, MoneyGram has agreed to a forfeiture of $125 million, which the federal government will make available to victims of consumer fraud. “No separate payment to the FTC is required under the Agreements,” MoneyGram said.
Furthermore, it will continue to retain an independent compliance monitor until May 10, 2021, “to review and assess actions taken by the company under the agreements to further enhance its compliance program,” the company said.
AML compliance enhancements
The company also has agreed to implement additional agent oversight and compliance program enhancements. As described by MoneyGram in its Form 8-K, those enhancements include:
Agent due-diligence remediation. “For agents deemed by MoneyGram to be high risk or operating in a high-risk area, MoneyGram will develop and implement a plan to conduct enhanced due diligence. On a monthly basis, MoneyGram will also calculate, with respect to each agent location for the preceding month, the monetary value of (a) completed money transfers that were the subject of a Consumer Fraud Report (CFR), (b) other completed money transfers made to the receiver who was identified as a fraud perpetrator in any such CFR, and (c) other completed money transfers made by the sender identified as a fraud victim in any such CFR, provided that such sender was also identified as a fraud victim in a second CFR within 30 days of the first CFR.
“If the total combined monetary value of (a), (b), and (c) exceeded 5% of the total monetary value of money transfers paid by that agent location for each of the three preceding months, MoneyGram will suspend the agent location’s ability to conduct further money transfers pending a review to determine whether the Agent location can continue operating. Upon completion of the review, MoneyGram will, where appropriate, terminate, restrict, or discipline the agent location.”
Anti-fraud alert system and alert program. The company will ensure that all money-transfer transactions originating in the United States, regardless of destination, will be monitored by the anti-fraud program to identify and prevent potentially fraudulent transactions. MoneyGram defines its anti-fraud program as “the Anti-Fraud Alert System; the company’s active interdiction system, including but not limited to the Internal Watch List; the Fraudster Interception Program; and all subsequent iterations and replacements of, and additions to, each of the foregoing.”
Transaction monitoring. The company will develop and implement a risk-based program, using the best tools available, to test and verify the accuracy of the sender and receiver’s biographical and identification data entered into the transaction database by MoneyGram agents.
“Over the past several years, we have taken significant steps to improve our compliance program and have remediated many of the issues noted in the agreements,” said MoneyGram’s Chairman and Chief Executive Officer Alex Holmes. “Currently, our consumer fraud reports are at a seven-year low and less than 0.05 percent, or 5 basis points, of all transactions conducted through MoneyGram systems are reported as fraudulent.”
“We will continue to bolster our compliance program to ensure it meets the highest industry standards and advances our goal of providing increased protection for all consumers,” Holmes added. “We remain steadfast in our efforts to partner with law enforcement and regulators to prevent our systems from being used to perpetrate fraudulent activity.”
MoneyGram said it has invested more than $100 million in compliance technology, agent oversight, and training programs since 2012. It has also implemented new, industry-leading consumer verification standards.
“These efforts have prevented approximately $1.5 billion in fraudulent transactions,” the company said. “In addition, MoneyGram has engaged a leading global consulting firm to support the company’s efforts to enhance its compliance program.”