Nearly 40,000 people compensated as a result of fraud processed by MoneyGram

News Desk

The issue of whether financial institutions should compensate customers who are victims of fraud where the institution processes payments is becoming a hot topic. The USA is leading the way in a field that many say sets dangerous policy.

In a statement today, the US Department of Justice said "The U.S. Postal Inspection Service (USPIS) announced today the disbursement of over USD115 million to 38,889 victims in connection with fraud schemes processed by MoneyGram International Inc. (MoneyGram). The victims, many of whom are elderly, will recover the full amount of their losses."

The compensation is a spin-off of a case relating to failures in MoneyGram's counter-money laundering policies and procedures.

"MoneyGram originally entered into a deferred prosecution agreement (DPA) with the Department of Justice in 2012 for wilfully failing to maintain an effective anti-money laundering program and aiding and abetting fraud schemes that generally targeted the elderly and other vulnerable groups. In November 2018, MoneyGram agreed to extend its DPA, implemented additional enhanced compliance obligations, and forfeited USD125 million – representing the volume of consumer fraud transactions it processed during the DPA term. The USPIS is using these forfeited funds to compensate the victims of the fraud through the remission process. MoneyGram completed its DPA in May 2021."

So this case is a little different to the developing situation because here there is known culpability by MoneyGram but it establishes - at least as an indicator - that counter-money laundering systems can, perhaps should, be used to identify suspicions of fraud as much as suspicions of money laundering.