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MoneyGram has been slapped with a fine after it failed to properly supervise agents engaging in suspicious transactions to China, New York’s state regulator has announced.
MoneyGram, the U.S.-based money transfer service, has agreed to pay $8.25m in penalties pursuant to a consent order entered into with the New York State Department of Financial Services (NYDFS).
The consent order, a legal mechanism in the U.S. that acts as a voluntary agreement worked out between two or more parties to a dispute, resolves the NYDFS investigation into MoneyGram’s failure to adequately supervise local agents in New York City.
This included the Flushing neighbourhood of Queens, popular with the city’s Chinese community, which the NYDFS says processed a substantial volume of suspicious transactions to China, in violation of the Bank Secrecy Act (BSA), as well as anti-money laundering (AML) requirements and state laws.
“Many New Yorkers depend on money transmitters to send money to their families, pay bills, and conduct other financial transactions,” said Adrienne A. Harris, superintendent at the regulator and a former Obama staffer.
But she warned: “To maintain the integrity of that system for law-abiding New Yorkers, it is crucial money transmitters like MoneyGram diligently monitor all activity on its platform to prevent bad actors from abusing the system for illegal means.”
The investigation
An examination and subsequent enforcement investigation conducted by the financial regulator found that MoneyGram failed to adequately oversee the activity of six agents that saw a large spike in transaction volume of business with China from locations throughout the city.
In 2014, the year preceding the spike in transaction volume, there were approximately 7,500 transactions between New York and China worth a total value of approximately $30m.
However, within a 17-month period from January 2016 through May 2017, activity jumped to more than 25,000 transactions, at a total value of more than $100m.
“The dramatic change in the number and size of the transactions processed by New York agents, most of which were small, store-front independent agents, was a clear indicator of increased money laundering risk, particularly given that the destination was known to carry a high AML risk,” the NYDFS said.
Other aspects of the increased transactions, including a suspicious pattern that many different senders transmitted money to the same recipient, were problematic, the regulator pointed out, stating that this should have put MoneyGram on clear notice to address these risks.
Once it was made aware of the suspicious spike in activity, MoneyGram terminated its relationship with the problematic agents and began instituting remedial measures designed to ensure better supervision of its agents across its network, among other measures.
Under the settlement that has been reached with the regulator, and in addition to payment of the six-digit penalty, MoneyGram will be required to report to the NYDFS on the enhancements to the policies and procedures of its compliance program for the BSA and AML regulations, its suspicious activity monitoring and reporting program, and customer due diligence requirements.
MoneyGram will also provide data to the NYDFS for ongoing monitoring purposes, the regulator confirmed.
A whole lotta fines
This is not the first time that the payment institution has got into hot water with U.S. financial watchdogs.
In 2018, MoneyGram agreed to pay $125m to settle allegations that the company failed to take steps required under a 2009 Federal Trade Commission order to crack down on fraudulent money transfers that cost U.S. consumers millions of dollars.
Two years prior, the Texas-headquartered company agreed to pay $13m to end a probe that stemmed from customer complaints that scam artists duped them into wiring funds via the money transfer service.
The settlement, with attorneys general in 49 states as well as Washington, D.C., included $9m for a nationwide fund that facilitated the return of money to some MoneyGram customers and another $4m that was used to cover states' costs and fees.
