MoneyGram to Pay $125 Million in Penalties Tied to Fraud Case

(Bloomberg) -- MoneyGram International Inc., the cash-transfer company, agreed to pay $125 million in penalties to the U.S. Justice Department for violating the terms of a 2012 settlement related to accusations that some MoneyGram agents defrauded customers.

The Justice Department, in documents filed in federal court in Pennsylvania on Thursday, said MoneyGram violated the terms of a 2012 settlement with the government by covering up weaknesses in its anti-fraud program. That led to the processing of an additional $125 million in fraudulent transactions between April 2015 and October 2016. The penalty money will go to victims, according to the filing.

MoneyGram also settled with the Federal Trade Commission, which had accused the company of violating a 2009 order requiring the company to crack down on fraud on its network.

A deferred-prosecution agreement that MoneyGram entered into with the Justice Department in 2012 will be extended to May 2021. The new resolution requires approval from the federal judge overseeing the case.

The company’s shares were 0.9 percent higher on Thursday, to $4.42. A MoneyGram spokeswoman didn’t immediately respond to a request for comment.

The penalty announced on Thursday is in addition to the $100 million in forfeiture that MoneyGram paid as part of its 2012 settlement for aiding a wire fraud and for violating anti-money-laundering laws.

A U.S. investigation from 2003 to 2009 into transactions involving MoneyGram’s U.S. and Canadian agents found that MoneyGram knew as early as 2003 that its agents were involved in a scheme to trick victims into sending money to fake accounts, prosecutors said in court documents.

Victims were promised they would receive lottery winnings, fictitious loans and large cash prizes. The scheme also involved offering high-ticket items for sale over the Internet at deep discount and posting jobs for “secret shoppers,” according to court documents. Victims were then directed to send advance payments to fake payees using MoneyGram, the government said.

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