Author: mtraAdmin

Attorney Generals in 45 states and the District of Columbia announced today that they have entered into an agreement with Western Union Financial Services, Inc. (“Western Union”) that will educate consumers and discourage fraud-induced transfers using Western Union’s wire services.

The agreement will curb “fraud-induced transfers,” in which unsuspecting consumers wire money to telemarketers and other scam artists. Some telemarketers, often based in other countries, use a “lottery” scam, in which they entice consumers into wiring them money for “taxes” or other charges in order to receive false lottery winnings. Other scammers frighten consumers into wiring money with a false story that a loved one needs bail money or emergency medical care.

Western Union and all states have joined forces to reduce the frequency of fraud-induced money transfers that are encouraged by scam operators. Western Union operates 40,000 wire transfer points in the U.S. and more than 195,000 around the world which, up to now, have been fertile ground for fraud artists to perpetrate crime against innocent consumers.

International wire fraud scammers have hit American consumers especially hard. For example, a seven-state survey found that approximately 29 percent of Western Union money transfers to Canada in excess of $300 were fraud-induced. Fraud-induced transfers represented about 58 percent of the total dollars transferred, at an average of over $1500 per transfer. Total American consumer losses to Canada in the year 2002 alone were estimated at $113 million.

Under the Agreement, Western Union will, among other actions:

• Publish prominent warnings to consumers on Send Forms about fraud-induced wire transfers in both English and Spanish;
• Pay $8.1 million over five years for national peer-counseling programs, overseen by the AARP Foundation, to reach 3 million consumers;
• Reimburse the transfer amounts plus transfer fees to any consumer who requests, prior to pickup, that a transfer be stopped and who reasonably claims that the transfer was fraud-induced;
• Regularly advise and provide enhanced training for Western Union agents about fraud issues;
• Terminate agents who are involved in fraud, and suspend or terminate agents who do not take reasonable steps requested by Western Union to reduce fraud; and
• Block wire transfers when Western Union learns of potential fraudulent transfers.

Western Union Financial Services is a wholly-owned subsidiary of First Data Corporation, based in Greenwood Village, Colorado.

To All MTRA Member States:

The 2005 MTRA Annual Conference in Charleston, SC last week was a huge success. It seems that every year the conference is better than the year before. For two years, President Phil Goddard has led the 35 or so member states in a cooperative effort to improve regulation and examination of the money transmission industry. During this time period, healthy and constructive dialogue between the industry and the regulators has allowed each side to have a better understanding of the other. The examination committee has made significant strides in realizing our goal to provide a more seamless examination product.

With these successes in mind, we must look ahead and challenge ourselves to improve the process that we began when we signed the cooperative agreement. I would like to set certain goals for the MTRA for the next two years.

1. Examination Committee – Establish the use of one core examination report that all member states find acceptable. All examiners have the same objectives when examining a company. It is clear that we use different methods to achieve these objectives. I know from past experience with our bank and credit union examiners who have already been through this process that states often do not like to give up what they perceive as “their way”. Now is the time to prepare this new Core Examination Report and gain acceptance for use by each member state. The 15 or so states that currently perform examinations are the likely candidates to undertake this review. No state should have to give up what they consider important exam information or data. Some states might have to accept a more detailed report than what is currently accepted. With the use of state-specific sections, all states will be able to meet their particular requirements. The industry will also benefit by understanding one examination format.

2. Ratings System – Those of us who are familiar with examination ratings systems know that the language between different groups can be bridged by the use of a common acceptable rating system. Examinations should produce a way for all readers to measure the different aspects of the operations of a company. After producing a core report, a rating system is the next logical step.

3. Examination School – As individual state regulators, we know the value of training our examination staffs’ to become proficient in their particular areas of expertise. The MTRA examiners school was formed several years ago as part of our annual conference. The schools have been praised by the attendees as providing valuable, timely and current information that can instantly be used as part of examination procedures. Bert Gonzales of Texas and John Bishop of Ohio have been invaluable to our examination school. When a state makes the decision to begin examining money transmitters, where can they turn to train a new examiner? Historically, you either trained your own people or asked other states if they could have a new employee tag along to learn the techniques. This approach does allow the student to see different methods but it is not a consistent training technique that the industry needs as it tries to operate across state lines. The industry comments I received at this year’s conference confirmed my belief that consistency in examination findings are needed. How can we produce a universal examination program that flows seamlessly from state to state? I believe the MTRA needs to establish an Introductory Exam School for new money transmitter examiners that last at least 4 days held at least once a year. A second school for advanced examiners should also be established annually to discuss current topics and more advanced techniques. These schools do not necessarily need to be attached to the annual conference.

I believe these goals can be accomplished with input from all involved states and the Board of Directors of the MTRA. Once they are achieved, our examination product will improve greatly and the industry will appreciate the efficiencies that we bring to the examination process. I look forward to working with all member states and the industry to improve and build on our past accomplishments. I am sure the 2006 Annual Conference in Santa Fe will be as successful as the Charleston conference.

Sincerely,
Joseph E. Rooney
Deputy Commissioner
State of Maryland

MTRA’s 2005 Annual Conference kicked off on November 7th in Charleston, South Carolina, with a record number of regulators and industry officials attending. About 240 regulators and industry officials attended the three day event, representing member states and money transmitters across the country. Representatives of the US, Mexico and Canadian governments also attended and made presentations. The conference included an examiners school, where the new IRS examination program was unveiled by IRS and FinCEN representatives. FinCEN Director William Fox, no stranger to MTRA, was the keynote speaker.

This year’s theme was entitled “A new Cooperation in State and Federal Regulation”. The program provided an atmosphere to facilitate networking and exchange between and among industry and regulators. In his key note address FinCEN Director Fox emphasized the important role states are playing in licensing and examining money transmitters thereby diminishing the money laundering risks associated with unlicensed money transmitters. There was also a discussion of the cooperative examination program developed by MTRA to examine transmitters operating across state lines thereby reducing the regulatory burden, the costs associated with multiple examinations and duplication of effort. A panel consisting of regulators, bankers and industry had a healthy discussion of the reasons banks are closing accounts of money transmitters and ways to address the problem. The consensus was that both bankers and money transmitters need to understand each others business and FinCEN needs to dispel the erroneous perception that the money transmitter business is high risk. As FinCEN Director Fox stated licensing and examination of money transmitters by the states and examination by IRS ameliorates the risk associated with the business.

The following directors and officers were elected for two years terms: Joseph E. Rooney (MD) President and Director, Randall S. James (TX) Vice President and Director, Robert Venchiarutti (CA) Secretary and Director, Tracy M Hudson (WV) Treasurer and Director, John Bishop (OH) Director, Reitzel Deaton (NC) Director, J. Philip Goddard (IN) Director, Greg Gonzales (TN) Director and Nicholas C. Kyrus (VA) Director.

The conference closed with a presentation of a plaque to outgoing MTRA President Phil Goddard for his services to the association. Incoming president Joe Rooney announced that the next annual MTRA conference will be held in Santa Fe, NM, in November 2006.

MTRA President Phil Goddard of Indiana and MTRA Vice President Joe Rooney of Maryland were asked to be on a panel of the American Bankers Association and American Bar Association joint conference of money transmitter issues and money laundering topics. The conference was from October 30 through November 1 at the Marriot Wardman in Washington D.C., and was attended by over 1,100 bankers and attorneys. The panel was moderated by Ezra Levine and Goddard and Rooney were joined on the panel by William Langford of FinCen and Tom Haider of Moneygram. The focus of the discussion was on the new MOUs as they relate to MSBs, interaction with the federal authorities regarding examinations, and the closing of MSB’s accounts by banking institutions. This breakout session was well attended by over 200 attendees and was the only session to include state regulators.

The MTRA Joint Examinations Committee has had a productive 2004-2005 term and is looking forward to establishing new goals for the coming 2005-2006 term. During the past twelve months and since the last MTRA conference in Denver, Colorado the committee has worked diligently to encourage MTRA member states to conduct joint examinations of common license holders. In addition, the committee continues to act as a resource for member states and to encourage communication between all member states with the hopes that this will lead to the sharing of reports of examination between member states as contemplated in the MTRA Cooperative Agreement.

During the past year, with guidance from the committee for planning and coordination purposes, a total of nine joint examinations were conducted. Lead states for these examinations included California, New York, Ohio, Pennsylvania, and Texas. For these joint reports of examination, the lead states utilized the core examination report pages and notification documents that were developed by the committee during the 2003-2004 term and which are available to all member states. Also, during the course of the year, the committee assisted in the coordination and planning of several “training” examinations which provided an opportunity for states developing examination programs to work with states that have on-going MSB examination programs and experience examining MSBs. States that participated for training purposes at these examinations were Georgia, Iowa, Maryland, Tennessee, Washington, and Wyoming.

The committee has also developed a list of criteria that must be met by states that want to serve as “lead state” for joint examinations. Also, to receive feedback from licensees that are examined jointly by MTRA member states, the committee implemented a survey questionnaire. Lastly, the committee assisted in developing a new section of the secure area of the MTRA website which displays a list of the joint examinations conducted. This section of the website entitled “Copies of Examination Reports of Money Transmitters” provides instructions, guidelines, and contact information to member states for requesting copies of joint examination reports.

An organizational meeting of the committee for the upcoming 2005-2006 term will take place on Tuesday, November 8, 2005 at 5:30 p.m. at the Francis Marion Hotel in Charleston, South Carolina during the MTRA Conference. The committee is seeking new members for the upcoming term and requests representatives from each member state to attend.

For more information about the committee’s work, one may contact Bert Gonzalez at the Texas Department of Banking or John Bishop at the Ohio Division of Financial Institutions