MoneyGram International Inc. – a global money services business headquartered in Dallas – will forfeit $100 million and enter into a deferred prosecution agreement (DPA) with the Justice Department.
Under the agreement, the company admits to criminally aiding and abetting wire fraud and failing to maintain an effective anti-money laundering program.
The firm was represented by John Villa and David Zinn of Williams & Connolly in Washington, D.C.
Federal officials alleged that MoneyGram was involved in mass marketing and consumer fraud phishing schemes, perpetrated by corrupt MoneyGram agents and others, that defrauded tens of thousands of victims in the United States.
MoneyGram also failed to maintain an effective anti-money laundering program in violation of the Bank Secrecy Act.
The Justice Department will return the forfeited funds to the victims of the fraud scheme through its Victim Asset Recovery Program.
“MoneyGram’s broken corporate culture led the company to privilege profits over everything else,” said Criminal Division Chief Lanny Breuer. “MoneyGram knowingly turned a blind eye to scam artists and money launderers who used the company to perpetrate fraudulent schemes targeting the elderly and other vulnerable victims. In addition to forfeiting $100 million, which will be used to compensate victims, MoneyGram must for the next five years retain a corporate monitor who will report regularly to the Justice Department.”
As part of the deferred prosecution agreement, MoneyGram will enhance its compliance obligations and structural changes to prevent a repeat of the charged conduct.
MoneyGram will also retain an independent corporate monitor who will report regularly to the Justice Department.
Under the agreement, the Department will recommend the dismissal of the criminal information in five years, provided MoneyGram fully abides by the terms of the agreement.
Federal officials alleged that MoneyGram violated U.S. law by processing thousands of transactions for MoneyGram agents known to be involved in an international scheme to defraud members of the U.S. public.
MoneyGram profited from the scheme by collecting fees and other revenues on the fraudulent transactions.
The scams – which generally targeted the elderly and other vulnerable groups – included posing as victims’ relatives in urgent need of money and falsely promising victims large cash prizes, various high-ticket items for sale over the Internet at deeply discounted prices or employment opportunities as “secret shoppers.”
In each case, the perpetrators required the victims to send them funds through MoneyGram’s money transfer system.
Despite thousands of complaints by customers who were victims of fraud, MoneyGram failed to terminate agents that it knew were involved in scams.
As early as 2003, MoneyGram’s fraud department would identify specific MoneyGram agents believed to be involved in fraud schemes and recommended termination of those agents to senior management.
These termination recommendations were rarely accepted because they were not approved by executives in the sales department and, as a result, fraudulent activity grew from 1,575 reported instances of fraud by customers in the United States and Canada in 2004 to 19,614 reported instances in 2008.
Cumulatively, from 2004 through 2009, MoneyGram customers reported instances of fraud totaling at least $100 million.