* Case involves violations of money laundering, fraud laws
* $100 mln to go to victims of fraud
* Case part of broader crackdown on money-laundering
Nov 9 Payment transfer company MoneyGram
International Inc agreed to forfeit $100 million and
admitted it aided in wire fraud and failed to maintain an
effective anti-money laundering program, according to court
documents filed on Friday.
Between 2003 and 2009, the U.S. Justice Department said, the
company processed thousands of transactions for its own agents
who often tricked victims into wiring them money by posing as
relatives or promising large cash prizes.
MoneyGram received thousands of complaints by customers who
were victims of the fraud, but the company failed to terminate
the agents that it knew were involved, the Justice Department
The company also admitted it failed to maintain an effective
anti-money laundering program in violation of the Bank Secrecy
The case is one of the first big cases from a new crackdown
against money laundering by banks and other financial
institutions from the department's Money Laundering and Bank
Integrity unit. While money-laundering charges have more often
been brought as tag-along charges to other types of cases in the
past, the new unit has been focused on the institutions that are
required to take steps to catch and combat the potential
laundering of funds.
Justice Department officials told Reuters in August they
planned to bring more cases under the BSA against a broader
spectrum of financial institutions than the department had in
Earlier this week, HSBC Holdings, Europe's biggest
bank, said it had set aside $1.5 billion to settle expected
charges that it violated U.S. anti-money laundering laws.
TIPPED TO A LOSS
MoneyGram agreed to retain a monitor and create an
independent compliance and ethics committee on its board, and
the Justice Department agreed to defer and drop the charges if
the company complied with terms of the settlement.
Customers reported fraud that added up to at least $100
million, the Justice Department said, and the money from the
settlement will be used to compensate the victims.
The settlement tipped the company to a third-quarter loss of
"Since 2009, we've created a new culture at the company and
have taken numerous steps to enhance our global compliance and
anti-fraud programs," Chief Executive Pamela Patsley said in a
The company had already set aside $30 million in the second
quarter related to the settlement and took an additional $70
million charge in the third quarter.
MoneyGram, which has 284,000 global money transfer agent
locations in 196 countries and territories, said it has created
two new executive-level positions to combat fraud.
MoneyGram customers use its third-party agents among other
methods to transfer money across the world.
Last week, Western Union Co, the world's largest
payment transfer company, cut its full-year forecast as rising
competition and weak markets weighed on its business.
MoneyGram's quarterly loss of 77 cents per share compares
with a profit of 22 cents per share a year earlier, when the
company reported earnings of $15.8 million.
Revenue rose 5 percent to $338.6 million.
MoneyGram shares, which have lost 22 percent this year up to
Thursday's close, were up 1.7 percent to $14.02 in Friday