​Cash-transfer Schemes

Poor anti-fraud and compliance measures can result in recurring fraud that is both financially and legally costly.

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​Cash-transfer company MoneyGram International has agreed to pay $125 million to settle charges that it covered up weaknesses in its anti-fraud program, The Orange County Register reports. Those weaknesses resulted in $125 million in fraudulent transactions between April 2015 and October 2016. Moreover, MoneyGram violated a 2012 settlement with the U.S. Justice Department. It also violated a 2009 U.S. Federal Trade Commission (FTC) order that required the company to put anti-fraud measures in place. Both of those actions stemmed from a six-year investigation that found the company had been aware that its agents had tricked customers into sending money to fake accounts.  

Lessons Learned

MoneyGram's website compiles advice on how consumers can avoid being defrauded when sending money (see https://bit.ly/1jR6xLu). Although MoneyGram may provide this advice to meet regulatory compliance requirements, it also may offer the information because the company has been implicated in such fraud. However, none of these examples warn that the culprit of the attempted fraud could be a MoneyGram employee or agent.

What measures should MoneyGram and other cash-transfer companies consider to prevent and detect employees who try to perpetrate fraud on their clients? MoneyGram has more than 150,000 employees and agents around the world, so a comprehensive internal anti-fraud regime is essential. Here are three measures that could help:

  • Increase the frequency and thoroughness of employee background checks before and after hiring. MoneyGram allegedly ignored thousands of complaints about a group of agents in the U.S. and Canada who handled hundreds of millions of dollars in transfers annually. Also, court findings in other fraud cases have alleged that many of MoneyGram's agents previously had been fired or suspended by competitor Western Union over fraud allegations. Yet, MoneyGram performed few background checks on those individuals.

  • Implement, monitor, and publicly report on the results of a complete whistleblower program for employees. In documenting its cases against MoneyGram going back many years, the FTC found that company managers often told employees to be quiet if they raised concerns about potential fraud by outsiders or employees. In some cases, employees who expressed concerns were disciplined or fired.

    The FTC has alleged that MoneyGram "typically rejected or ignored employee concerns, claiming that they were too costly or that consumer fraud prevention was not the [company's] responsibility." The company operates a hotline through which employees and agents can report violations of its anti-fraud policies. MoneyGram should audit the program regularly to determine its effectiveness.

  • Institute a meaningful culture and practice of accountability. The FTC has repeatedly fined MoneyGram, saying the company knew its system was being used to defraud people but did nothing to stop it. As far back as 2009, U.S. investigators found that 131 of its 1,200 agents in Canada and the U.S had solicited consumers to send them deposits via MoneyGram for lottery entries, guaranteed loans, and other schemes. These deposits accounted for more than 95 percent of fraud complaints MoneyGram received in 2008 regarding money transfers to Canada. The FTC further alleged that the employees responsible were never terminated.

    Real accountability calls for moving beyond financial fines to discipline and potentially termination of individuals who perpetuate this kind of fraud. These individuals could include employees, supervisors, managers, senior executives, or board directors. MoneyGram has instituted anti-fraud accountability measures such as creating an ethics and compliance committee reporting to its board, as well as establishing two related executive positions. However, these actions have not generated enough results.
Art Stewart
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About the Author



Art StewartArt Stewart<p>​Art Stewart is an independent management consultant with more than 35 years of experience in internal audit, financial management, performance measurement, governance, and strategic policy planning.​​​</p>https://iaonline.theiia.org/authors/Pages/Art-Stewart.aspx


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