Feds, States Taking Another Look at MoneyGram

State and federal regulators are once again looking into MoneyGram's operations, trying to determine if the world's second-largest money transfer company is taking adequate steps to prevent consumer fraud.

The company disclosed in a securities filing yesterday that it has received civil investigative demands from a working group of nine state attorneys general, the Minneapolis Star-Tribune reported.

In addition, MoneyGram disclosed that the Financial Crimes Enforcement Network of the U.S. Treasury, known as FinCEN, has requested information on the company's reporting of fraudulent transactions between 2004 and 2009, the newspaper said.

It's not the first time the company has run afoul of regulators. In March 2009, MoneyGram agreed to pay $18 million to settle FTC charges that it allowed its money transfer system to be used by fraudulent Canadian telemarketers to bilk U.S. consumers out of tens of millions of dollars.

The FTC charged that between 2004 and 2008, MoneyGram agents helped crooked telemarketers and other con artists who tricked U.S. consumers into wiring more than $84 million within the United States and to Canada -- after these consumers were falsely told they had won a lottery, were hired for a secret shopper program, or were guaranteed loans.

The $84 million in losses is based on consumer complaints to MoneyGram - actual consumer losses likely are much higher.

The FTC charged that MoneyGram knew that its system was being used to defraud people but did very little about it, and that in some cases its agents in Canada actually participated in these schemes.

As part of its settlement with the FTC, MoneyGram agreed to put consumer fraud warnings on the front page of all money-transfer send forms and to conduct reasonable background checks of all people who apply to become MoneyGram agents, among other measures.

MoneyGram said it has taken a number of other steps to prevent fraud in the year and a half since the FTC settlement. This includes tripling its antifraud staff; intensifying scrutiny of transactions; posting warnings on its website of various scams; and providing training for agents to help spot possible fraudulent transactions, among other steps.

As a result of these actions, MoneyGram estimates it has prevented more than $22 million in suspected fraud, and fraudulent transactions sent from the United States and Canada have decreased by 70 percent, the company said in a written statement.

MoneyGram said in its securities filing Wednesday that it continues to cooperate with regulators. However, due to the early stage of the investigations, the company said it cannot predict the outcome or possible loss, or range of loss, resulting from them.

The company didn't disclose which nine states are asking for information.