Regulators sue money transfer services

Many of the scam reports consumers file with the BBB cite pre-paid debit cards, gift cards, and cryptocurrency as the way the crooks want to receive their ill-gotten gains. But money transfer services have been a payment method of choice for crooks for far longer and the subject of numerous government enforcement actions alleging that the companies know they’re facilitating fraud.

Why do crooks like wire transfers? To quote the FTC – “Scammers want payments that are quick, anonymous, and tough to reverse. In other words, scammers are asking for wire transfers.”

In 2017, Western Union agreed to forfeit $586 million to settle charges by the FTC, Department of Justice, and other regulators that it knowingly facilitated billions of dollars in fraudulent transfers. MoneyGram paid $125 million in 2018 to settle similar charges. That was actually the third time in ten years that the FTC had landed on MoneyGram.

More recently, the FTC has leveled similar charges against Walmart, which acts as an agent for MoneyGram, Western Union and Ria. It offers some money transfer services under its own brands, Walmart2Walmart and Walmart2World. Walmart says the lawsuit is factually flawed and legally baseless, defends its anti-fraud efforts that it says have helped protect countless customers, and says it has saved consumers an estimated $6 billion in money transfer fees.

The FTC and BBB offer these tips to avoid becoming the victim of wire transfer fraud:

  • Never wire money to anyone who claims to be from a government agency.
  • Don’t wire money to a stranger or someone you’ve never met for any reason.
  • Never wire money to someone who tries to sell you something over the phone. It’s illegal for a telemarketer to ask you to pay using a wire transfer.

A new lawsuit indicates that regulators’ concerns about money transfer services go beyond facilitating fraud. The Consumer Financial Protection Bureau (CFPB) and New York Attorney General have sued MoneyGram alleging that it stranded customers waiting for their money when it failed to deliver funds promptly to recipients abroad.

The CFPB says international money transfers form an important part of the financial lives of people who may be working tirelessly to support family and friends in the US and abroad. MoneyGram operates in over 200 countries and territories and many of its transactions are initiated by immigrants or refugees in the US sending money back to their native countries.

In bringing the enforcement action, the NY Attorney General said, “Our immigrant communities trusted MoneyGram to send their hard-earned money back home to loved ones but MoneyGram let them down.” The CFPB Director said, “MoneyGram’s long pattern of misconduct must be halted.”

The Remittance Transfer Rule protects the rights of people who send money to foreign countries. The lawsuit alleges that MoneyGram violated it and other federal consumer financial laws by:

Stranding customers waiting for their money. MoneyGram held up funds unnecessarily, harming people who were relying on the money to pay for necessary living expenses.

Botching instructions to its employees on how to comply with laws on resolving disputes. MoneyGram failed to adequately inform consumers about the results of error investigations.

Neglecting to develop and document policies and procedures. MoneyGram failed to put in place policies and procedures designed to ensure compliance with money-transferring laws.

Randy Hutchinson is president & CEO BBB of the Mid-South.

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