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
"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
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
- 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
- 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.
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