MoneyGram, NYDFS agree on $8.25M settlement for supervision lapses

The monetary value of the finalized agreement was disclosed by MoneyGram as part of an annual report filed with the Securities and Exchange Commission last month. The company has also set aside $7.5 million for a potential settlement with the Consumer Financial Protection Bureau to address a separate matter that is ongoing.

The details: Six New York-based MoneyGram agents were flagged by the NYDFS as being responsible for a substantial spike in transaction volume in China over a 17-month period from January 2016 through May 2017, the regulator stated in a press release.

“The dramatic change in the number and size of the transactions processed by New York agents—most of which were small, store-front independent agents—was a clear indicator of increased money laundering risk, particularly given the destination was known to carry a high AML risk,” the NYDFS explained. “Moreover, other aspects of the increased transactions, including a suspicious pattern that many different senders transmitted money to the same recipient, were problematic and should have put MoneyGram on clear notice to address these risks.”

An NYDFS investigation of MoneyGram conducted from March to April of 2017 revealed compliance weaknesses that included the company’s supervision of the agents. Upon identifying the issue, MoneyGram terminated its relationship with the agents and began remedial measures to improve its supervision controls, according to the regulator.

These efforts were acknowledged by the NYDFS in its assessment of a penalty amount, as was MoneyGram’s cooperation in the case. As part of the settlement, the company must report to the regulator enhancements to its Bank Secrecy Act program, suspicious activity monitoring, and customer due diligence requirements.

MoneyGram response: “We’re pleased that this legacy matter from many years ago is now behind us,” said MoneyGram Chairman and Chief Executive Alex Holmes in a press release. “MoneyGram continues to work diligently to prevent its systems from being used to perpetrate any unlawful activity. Building an industry-leading compliance program has for years been front and center of our commitment to protecting our customers and communities.”

In November 2012, MoneyGram agreed to forfeit $100 million and enter a deferred prosecution agreement (DPA) with the Department of Justice (DOJ) for processing thousands of transactions for its own agents known to be engaging in a widespread money laundering scheme that defrauded tens of thousands of people out of at least $100 million. The company said it has invested $800 million in compliance technology, agent oversight, and training programs since that year.

In May 2021, MoneyGram announced the DOJ concluded it had fulfilled its obligations under the DPA, including the approval of enhancements to its anti-money laundering program by a compliance monitor.