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Agreement Reached To Reducing Risks of Fraudulent Wire Transfers


November 25, 2005

Alaska Attorney General David Márquez announced recently that Western Union Financial Services, Inc., has entered into an Agreement with Alaska and 46 other States and the District of Columbia, in response to concerns about the use of the company's wire transfer services by fraudulent telemarketers. Under the Agreement, Western Union will, among other things, fund an $8.1 million national consumer awareness program and set out very prominent consumer warnings on the forms used by consumers to wire money.

"Many people who engage in telemarketing fraud rely on wire transfers," said Márquez. "Because wire transfers are a fast and efficient mechanism to transfer funds, many perpetrators of these types of frauds are based in other countries."

"Lottery" scams are a classic example of a type of fraud that utilizes wire transfers. In these scams the perpetrators tell vulnerable consumers they have won a large sum of money but must pay taxes or other charges in order to claim the winnings. The victims are then directed to send the money by wire, because wire transfers are fast, there are transfer agents in most communities, and funds can be picked up in multiple locations.




The problem of fraud-induced transfers is substantial. Based on a survey conducted by seven states, it was estimated that over 29 percent of Western Union transfers in excess of $300 from the U.S. to Canada were fraud-induced, representing 58 percent of the total dollars transferred and an average of over $1500 per transfer. Total American consumer losses to Canada in the year 2002 alone were estimated at $113 million.

In response to these findings, the States undertook to negotiate an agreement with Western Union that would provide prominent warnings to consumers who transfer money by wire, education of high-risk consumers, and changes in company practices.

Among the terms of the Agreement just reached are these:

  • Prominent warnings to consumers of the dangers of fraud-induced wire transfers must appear in English and Spanish on a new front page of Western Union's Send Form, and comparable warnings are required for telephone and Web transfers.
  • Western Union will pay $8.1 million over five years for national peer-counseling programs to be overseen by the AARP Foundation and designed to reach at least 3 million consumers.
  • Western Union will reimburse the amount of any transfer plus fees to any consumer who requests, prior to pickup, that a transfer be stopped and who reasonably claims that the transfer was fraud-induced.
  • Western Union will send monthly anti-fraud emails to its agents, revise the company's agent training video and manual, and provide enhanced training to agents with elevated fraud levels at their locations.
  • Western Union will terminate agents who are involved in fraud, and suspend or terminate agents who do not take reasonable steps requested by WU to reduce fraud.
  • Western Union will block wire transfers from specific consumers or to specific recipients when Western Union receives information from a state that there is reason to believe that fraud will occur, until such time as the consumer is counseled on fraud and requests resumption of the transfer.
  • Western Union will pay $400,000 in costs to be shared among the negotiating states of Arkansas, Massachusetts, New Jersey, New York, North Carolina, Ohio, Texas, Vermont, Washington and Wisconsin.

"I commend Western Union for stepping forward in this manner and agreeing to implement programs and changes to protect our citizens and their customers," said Márquez." "The consumer warning in particular is extraordinarily clear and prominent and should be used as a model for consumer disclosures in the future."

W estern Union Financial Services is a wholly-owned subsidiary of First Data Corporation, based in Greenwood Village, Colorado. Signing the Agreement were the States of Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, and the District of Columbia.


Source of News:

Alaska Department of Law

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