Western Union to combat wire fraud

Western Union to combat wire fraud
Attorney General Larry Long announced Nov. 14 that Western Union Financial Services, Inc., has entered into an agreement with South Dakota 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.

"Consumers should never wire money to someone they do not know," said Long. "Scam artists prefer to receive money by wire because once money is sent by wire, it is not possible to trace where it went, and it is nearly impossible to recover." Long reminds consumers that credit cards are usually the safest way to pay for goods and services because credit cards carry significant protections for consumers, including limitations on liability for unauthorized transactions.

Western Union Financial Services is a wholly-owned subsidiary of First Data Corporation, based in Greenwood Village, Colorado. The problem addressed by the agreement is the high number of "fraud-induced transfers" � that is, money wired by consumers to fraudulent telemarketers and other scam artists.

For example, some telemarketers, often based in other countries, use a "lottery" scam, in which they 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 untraceable, they 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.

Long stressed the importance of enlisting "third parties" like Western Union in the fight against consumer fraud. "We appreciate Western Union's cooperation in implementing programs and changes to protect our citizens and their customers." Consumers should consider requests to wire money as a red flag. Long reminds consumers to contact his Consumer Protection Division at 1-800-300-1986 or local law enforcement if an offer sounds too good to be true.

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