MoneyGram settles charges of abetting fraud

In one of the largest consumer payouts of its type, MoneyGram International has agreed to fork over $18 million to the Federal Trade Commission to settle charges that it knowingly allowed con artists to use its operation to swindle U.S. consumers out of millions of dollars.

"This is a pretty significant amount of money to return to consumers," FTC Chairman Jon Leibowitz said.

The money will go directly to provide relief to victims. If you're one, call 202-326-3755. Nobody is likely to be fully reimbursed, but distributions will be proportionate to the amount of money lost. The FTC is still working on how to verify claims and when people will be paid.

The FTC charged that MoneyGram knew that its system was being used to defraud people but didn't do enough about it, and that in some cases MoneyGram agents actually participated in the schemes.

The FTC said that from 2004 to 2008, fraudulent telemarketers and others using MoneyGram's system persuaded U.S. consumers to wire them more than $84 million within the United States and to Canada. And that's only what people reported they lost. The actual amount could be much higher.

"They were involved in facilitating all these transfers," Leibowitz said of MoneyGram in an interview. "It was easier to go after them than the individual scammers."

MoneyGram did not admit to any wrongdoing.

"We do not want to get into discussions about the individual allegations made by the FTC," Lynda Michielutti, MoneyGram's director of corporate communications, wrote to me. "Suffice to say, we do not agree with the FTC's claims."

Michielutti said the company's anti-fraud department has stopped millions of dollars in fraud and has worked closely with authorities.

"However, we believed that it was in the best interest of our company and our consumers to put this matter behind us and focus our resources on delivering our valued service to consumers rather than battling it out through a long and costly trial," she said.

Crooks use a number of schemes that involve money transfers through companies such as Western Union and MoneyGram, the FTC says. Money transfers are virtually the same as sending cash. Once you make a transaction, there is no way you can reverse it or trace the money.

The FTC said a survey found that at least 79 percent of all MoneyGram transfers of $1,000 or more from the United States to Canada over a four-month period in 2007 were fraud-related.