MoneyGram under investigation again

MoneyGram International Inc., the world's second-largest money transfer company, said state and federal regulators have begun an investigation into whether it took adequate steps to prevent consumer fraud.

The company, which recently moved its headquarters from St. Louis Park to Dallas, has received civil investigative demands from a working group of nine state attorneys general, according to a securities filing on Wednesday.

In addition, MoneyGram disclosed that the Financial Crimes Enforcement Network of the U.S. Treasury, known as FinCEN, has requested information on the company's reporting of fraudulent transactions between 2004 and 2009. In November, the company met with representatives of FinCEN and the U.S. attorney from Scranton, Pa., according to the securities filing.

Shares of the company fell 5 cents, or 1.65 percent, to $2.98 a share Wednesday.

MoneyGram, which was founded in the Twin Cities, has spent much of the past two years under a regulatory cloud.

In October 2009, the company paid $18 million to settle allegations by the U.S. Federal Trade Commission that it allowed its money transfer system to be used by fraudulent telemarketers in Canada who allegedly bilked U.S. consumers out of more than $80 million from 2004 to 2008. The settlement was the largest of its kind involving the FTC and a money transfer company.

The FTC alleged that MoneyGram, which operates 227,000 money transfer locations worldwide, encouraged fraudulent activity by ignoring warnings from law enforcement officials and its own employees that fraud was being conducted over its network.

MoneyGram said it has taken a number of other steps to prevent fraud in the year and a half since the FTC settlement. This includes tripling its antifraud staff; intensifying scrutiny of transactions; posting warnings on its website of various scams; and providing training for agents to help spot possible fraudulent transactions, among other steps.

As a result of these actions, MoneyGram estimates it has prevented more than $22 million in suspected fraud, and fraudulent transactions sent from the United States and Canada have decreased by 70 percent, the company said in a written statement.

Down this road before

Even so, it remains unclear whether these measures will satisfy state and federal regulators. "It seems like every time [MoneyGram] resolves one legal issue, there's another one down the road," said Brett Horn, an analyst who covers the company for Morningstar.

MoneyGram also invested heavily in mortgage-backed securities that lost much of their value after the housing market collapsed in late 2007. The company ultimately lost more than $1.6 billion on the securities, and was forced to sell itself in 2008 to a consortium of investors led by private equity giant Thomas H. Lee Partners.

No claims have been made against the company, according to the securities filing. A company spokeswoman declined to comment on the multiple investigations.

The company didn't disclose which nine states are asking for information. A spokesman for the Minnesota attorney general's office declined to comment on whether it is part of the working group that is investigating MoneyGram.

MoneyGram moved its headquarters to Dallas in November, citing the market's proximity to Latin America, an important money transfer market. The company still employs 800 people at its former headquarters building in St. Louis Park, and a spokeswoman said the Twin Cities "remains an important hub of operations" for MoneyGram.