MoneyGram settles fraud allegations with DoJ


Payment transfer company MoneyGram International Inc said it reached a $100 million settlement with U.S. authorities related to suspected fraudulent transactions by some agents.

The settlement, which also involves the appointment of an independent compliance monitor, tipped the company to a third-quarter loss of $54.8 million.

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MoneyGram shares were down 3.8 percent at $13.26 in early trading on the New York Stock Exchange.

The U.S. Attorney's Office for the Middle District of Pennsylvania and the Department of Justice had accused MoneyGram of aiding wire fraud and failing to implement an effective anti-money laundering program, the company said.

MoneyGram did not provide details of the allegations, which relate to transactions by third-party agents in Canada and United States from 2003 to early 2009.

"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," said Chief Executive Pamela Patsley.

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.

The $100 million will be available to victims of the consumer fraud scams perpetrated through MoneyGram's third-party agents, the company said.

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 lost 22 percent this year up to Thursday's close. (Reporting By Neha Dimri and Tanya Agrawal in Bangalore; Editing by Saumyadeb Chakrabarty)