Money Transfer Firm Fined for Violating Fraud Prevention Agreement

Inside Subprime: Nov 26, 2018

By Grace Austin

A major money transfer company is ponying up after allegedly violating settlement agreements reached nearly a decade ago to amp up its anti-fraud measures.

The money transfer firm will pay $125 million in refunds to consumers after breaking those agreements with the Federal Trade Commission and the U.S. Department of Justice following claims that its agents ran consumer fraud schemes that the company did little to prevent.

The federal government is engaged in ongoing efforts to go after scammers that often use wire transfers as a relatively untraceable way to receive money from consumers. Those efforts originated nearly a decade ago when the FTC and DOJ first went after the money transfer firm, which has hundreds of thousands of agent locations.

In 2009, the FTC and DOJ sued the firm for failing to prevent fraud in its money transfer system and even claiming some storefronts were involved in scamming customers. The FTC said that consumers were losing millions in money transfer fraud while the firm profited from the fees for transferring funds.

The 2009 agreement terms required the firm to put an anti-fraud program into place, vet all agents, investigate all complaints on current agents and fire them if needed, and send any consumer complaints to the FTC.

The FTC claims the firm violated those conditions. While the firm did have an electronic anti-fraud system, the FTC is saying technical issues over the course of a year and a half meant continued fraud. The firm is also accused of hiring associates from within the industry that had been fired for money transfer fraud —Another major was also hit with a more than half a billion dollar lawsuit from the FTC and the DOJ for its own fraud complaints.

The FTC claims the firm did not send all consumer complaints to the government agency, nor did it even record all of those complaints. The FTC also states consumer complaints more than doubled between 2012 to 2016, and they were concentrated in under 4 percent of all operating agents.

In addition, the firm is accused of failing to scrutinize the conduct of large-scale operations that had fraud allegations leveled against them, instead going after smaller “mom and pop” stores.

Besides the $125 million it has to pay back to consumers who’ve been scammed, the firm must also improve the anti-fraud program that has gotten the corporation into trouble. That means stopping potential money transfer scams and refunding consumers when agents haven’t followed “applicable policies and procedures,” according to the FTC.

Money transfer fraud is a common way for scammers to prey on consumers. Consumer advocates say you should never send money to someone you don’t know, and you should contact local or federal authorities if you think someone is trying to scam you.

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