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MoneyGram (MGI) Misleading Info on Anti-Fraud Efforts Securities Class Action

MoneyGram Sign on Building

As the world has become smaller via electronic transactions, fraud and money laundering have become more of a concern for regulators. The complaint for this securities class action claims that MoneyGram International, Inc. provided false or misleading information to shareholders about its fraud- and money laundering-prevention measures. 

The class for this action is all persons who acquired the publicly-traded MoneyGram securities between February 11, 2014 and November 8, 2018 and were damaged at the corrective disclosures.

MoneyGram’s business is the transfer of funds throughout the US and the world. The complaint quotes from its filings with the Securities and Exchange Commission (SEC) during the class period about its efforts to prevent fraud and money laundering and to comply with related regulatory requirements.

For example, in the press release announcing its financial results for the fourth quarter and year ending December 31, 2013, it said, “Since 2009, MoneyGram has invested more than $120 million in its compliance and anti-fraud programs and has successfully prevented more than $365 million in fraud losses, with $135 million prevented in 2013. The Company will continue to advance its leadership in global compliance by implementing market-leading systems, technology and processes, and increasing agent oversight around the world.”

Its Form 10-Ks for 2013, 2014, 2015, 2016, and 2017 contained this sentence: “We continually monitor and enhance our global compliance programs in light of the most recent legal and regulatory changes.”

However, the Federal Trade Commission (FTC) in 2009 had required the company to implement an anti-fraud program, and that the company also had a 2012 Deferred Prosecution Agreement with the Department of Justice (DOJ) involving its anti-fraud and anti-money laundering programs. While making these statements, the complaint says, the company was not keeping up with either agreement. 

On November 8, 2018, the FTC put out a press release. Its title was, “MoneyGram Agrees to Pay $125 Million to Settle Allegations that the Company Violated the FTC’s 2009 Order and Breached a 2012 DOJ Deferred Prosecution Agreement[.]” The press release said that the FTC had filed a complaint against MoneyGram making a number of allegations:

  • That the company had not implemented the anti-fraud program mandated by the FTC’s order.
  • That it had been aware for years of “high levels of fraud and suspicious activities involving certain agents”.
  • That it had allowed its computerized anti-fraud system to malfunction.
  • That it hadn’t properly vetted agents or provided adequate anti-fraud training. 
  • That it hadn’t passed complaints about fraud-induced money transfers along to the FTC.

The complaint alleges that the company violated Sections 10(b) and 20(a) of the Exchange Act, as well as the SEC’s Rule 10b-5, regarding false or misleading statements.

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