Wire transfer companies try to stop scammers in the act

February 5, 2010 12:00:00 AM PST
7 On Your Side has investigated all sorts of scams where money is sent through wire services like Western Union and MoneyGram. So why are those two services so popular with con artists?

Western Union and MoneyGram are both really liked by conmen since money can be received within minutes and once they have their hands on the loot, it is unlikely the victims will ever see their money again.

Norm Barone was scammed out of $5,800 and it all started with a phone call from a conman posing as Norm's grandson.

"The person got on there and said 'Hi Gramps, I am up in Canada and I'm in a bit of trouble.' He said 'Hi Gramps,' well that's what Justine calls me, Gramps," says Norm.

The conman was on top of his game and Norm was worried about his grandson.

"I said, 'Justine is that you?' and he said 'Yea.' Well, I gave them the first name and that's the way they do it," says Norm.

Norm was told Justine was jailed in Canada for drunk driving and needed bail money.

Norm wired $2,900 and then when requested, wired $2,800 more.

"This is a huge problem. I am sure that consumers have lost hundreds of millions of dollars sending money through wire transfers over the last several years," says C. Steven Baker.

Baker is director of the Midwest region of the Federal Trade Commission.

For cases unrelated to Norm, Baker's office went hard after MoneyGram accusing the company of "...knowingly or with conscious avoidance of knowledge, provided substantial assistance and support to fraudulent telemarketers."

Eventually MoneyGram agreed to pay $18 million and agreed to work at "...detecting, preventing, reporting... suspicious transactions..."

"We are working very hard to educate consumers about the scams. We're working very hard to educate our agents and their employees about the scams and we are working very hard to stop the scams from going through our network," says MoneyGram's director of fraud prevention, Willard Hart.

Five years ago Western Union entered into an assurance of voluntary compliance agreeing to revise its agent training and warn consumers about fraud-induced money transfers.

In a statement, Western Union told 7 On Your Side, "Western Union takes the issue of consumer fraud very seriously. We work to educate our many agents about the various kinds of fraud."

Linda Eagle trains financial service workers in all areas of banking including fraud detection.

"They are required to tell the person, 'I think what you are doing is suspicious. I think this is not a good thing to do,' and they are required to report it," says Eagle.

She says good training can stop these kinds of scams. And in Norm's case that is true; he was going to send another $2,900.

"The teller said, 'You know, I think that's a scam', and I said, 'You know, the more I think about it...I am with you," said Norm.

At least Norm hung on to that money, but what about the rest of us?

7 On Your Side went undercover to investigate the problem further. 7 On Your Side wanted to test if the two big wire services are doing enough to prevent their services from being misused for fraud.

7 On Your Side wired $1,000 back and forth between San Francisco and San Diego to see, first hand, if our decoys would be warned that they could be involved in a scam.

More on that story here: Are wire transfer companies doing enough to stop scams?