Western Union, MoneyGram and PayPal condone scammers!

[is this the right forum for this topic ]

I've corresponded with Western Union and PayPal several times as a result of scams that were targeted at me or some friends of mine.

• In one case (with PayPal), I bought something that turned out to be fake - but it took me a while to realize this - too long to process the complaint through PayPal (or ebay)'s normal procedures.
  
• In another case, I was asked to send money to a 'friend' (from a dating site) desperately in trouble overseas [but luckily I managed to stop the transaction in the nick of time by choosing instead to send the money to a 'real' friend I knew who lived nearby: the scammer never came to collect her cash! Probably not a real person anyway...]

The point of my complaint was (and is) that companies like PayPal and MoneyGram and Western Union are complicit in many of these scams - they transfer the money without having proper checks and balances in place, and with no intention of following up on illegal activity - because they benefit from the transaction fees!

I discovered, for instance, that Western Union does not require bone fide identification and doesn't perform any careful checks for amounts below $1,000. Interestingly, nearly all scams which request money via WU are below this amount.

When I reported the scammer to Western Union, they ignored me. I eventually contacted a customer service manager who simply informed me that they don't advise sending money to people you don't know personally and therefore it isn't their responsibility. That was a right royal fob-off! Yes, they are right - but they also know full well that many fund transfers are scammed or illegal in some way. They don't want to stop this!

ebay/PayPal's response was equally flippant: they told me to "report it to the local police". How on earth would I do this? And why is it my responsibility to do so? PayPal took my money and transferred it to the bank account of a fraudulent seller, knowing that there had been suspicions about the seller. Even if they didn't know at the time, they hold a lot of personal information about the seller: his bank account and registered home address for one, which they can then pass on to the local police (of wherever the seller happens to reside, probably Hong Kong in my case). But they didn't want to do this (saying that such information was private). Yes of course it's private - which is exactly why they are responsible for investigating the case and reporting it to the local authorities and the bank of the account holder, etc.

I have many more cases in the same vein, but these are the epitome of how these financial institutions are aiding and abetting the scammers. If we were to assist criminals in a similar way, we would be arrested and charged - even if we were somewhat ignorant of the criminal's intentions. So why aren't PayPal, MoneyGram and Western Union not criminally liable if they condone this kind of activity? If they were at least liable for the financial losses then I'm damned sure their operations wouldn't be quite so lax (despite their marketing hype about it being 'safe' to use their services).

So - finally to get to the point - the main reason why I am posting this is to ask if there is something we can do as victims and consumers to pressure at least these three big companies to vet the recipients of the funds much more carefully, and to follow through on investigations were the seller or recipient turns out to be fraudulent or a scammer?

It wouldn't be all that difficult for them to implement:

• For recipients of cash, a bone fide ID should be required - there are machines (used by immigration at airports) that can read passports, etc. to check for legitimacy. In the case of relatively small amounts, or where the recipient is in a kind of emergency situation (e.g. passport lost or is a 'poor' local who has no passport) then some kind of mechanism where the recipient first has to report to the police station and provide more comprehensive evidence of his or her ID and home address. Very few scammers will risk going through a police procedure (finger printing? database check? photograph in case of illegal activity?) and the police will not want to be known for too easily 'clearing' scammers without at least going after them and generating a criminal file for scammers or their mules.
• For recipients with bank accounts, the banks are usually liable for criminal activity or money laundering activities - which means that they are usually quite careful about checking ID and the financial standing of an individual when opening up an account initially. At least they will have the reference of the photo ID - usually passport - used to open the account, and they will have verified the home address. Again, if banks are made financially liable for harboring the account of a person who turns out to be a scammer or a fraudulent seller then they will be much more diligent about checking dubious account activities.

These measures are not foolproof, I know (and there might be other easy yet effective measures that could also be put in place); but at least it makes it a lot more difficult for scammers to get away with it... and (worse) continue their operations elsewhere, even after they've been caught out.

The amount of money that is being 'stolen' in relatively small quantities at a time is staggering - it puts all the big bank robberies and large frauds to shame - so it is something that Interpol and inter-government agencies would want to address - and they are the organizations who could have some real impact on these scams.

One suggestion might be for all visitors of this site to contact avaaz.org and ask them to initiate a publicity campaign - at least against PayPal, Western Union and MoneyGram - to verifiably implement anti-fraud, anti-scam procedures.

These companies (and some other large financial institutions like Visa, for instance) are the major gateways for fraudulent activity. They really don't want to stamp it out or minimize it, because a good portion of their revenue comes for these activities in the form of hefty transaction fees ($50 a pop for WU, plus 2%-3% on exchange rate transactions, plus another 2%-5% for the administration fee: Visa/PayPal et al).

But if enough people make a fuss - and if enough people start to boycott these institutions - then there is a much better chance that these kinds of scams will fizzle out.

If there is no air then there can be no fire!

This is a large and complex area garywashere and I'll mention that I worked in a bank before I retired, so I feel that I have a good insight in this area.

There's nothing intrinsically wrong with Western Union, MoneyGram or Paypal and scammers are hammering away at all financial institutions and payment methods thousands of times a day looking for new ways to exploit loopholes and chinks in their systems.

Western Union and MoneyGram have problems in that many of their operators are probably using poorly trained minimum wage staff who may not feel comfortable turning away business. On the other hand, and we know this to be true, there are occassions in some outlets where staff have pro-actively turned victims away and saved them losing money. The fact is that these outlets are very varied and imposing a standard level of service is very difficult. To confuse matters, new methods of payment are being introduced, and some of thems range from being little more than scams themselves to riskier methods than exist already.

In spite of my background I am critical of banks and how easily they can allow their systems to be exploited. One of the simplist scams involves getting someone to divulge their card details for a bogus transaction, and for the scammer then to pillage their account. Traders who operate this way should simply not be allowed this facility, but it isn't a rare occurrence.We know the shortcomings of these systems only too well, but the chances of us managing to make fundamental changes to those systems is unlikely and, believe me, I'm always off on crusades over issues like this on other forums. The quickest way we can make a difference is in what we do - by warnings and informing people of the risks and dangers.

The topic is akin to the issue of dating and employment websites and putting responsibility for keeping scammers away on to the site operators. The more stringent their procedures are, the less successful their sites will be, which will only mean that the most successful sites may well be those without restrictions.

It's a complex issue, especially now that there are new competitors attempting to get a market share of the payments business, so there's never been a time when there is more pressure for operators to make their systems more accessible to a wider section of the public. The danger is that this may make them more vulnerable to misuse by scammers.

There are no easy answers to the problem.

Yes, you are absolutely right Gomer. It's not a straight-forward issue by any means. Nevertheless, there are reasonably effective and relatively inexpensive 'fixes' that could be implemented.

But I still believe the banks (or 'banking industry') are primarily to blame for the ease by which victims are scammed.

For instance, the banks resisted chip-and-pin cards for an awfully long time - granted, quite a big infrastructure investment - but for those countries where it's routine (France!) credit and debit card fraud has been almost completed eliminated. Before, it cost consumers (and even the banks) billions of dollars each year!

The banks still resisted converting wholesale to chip-and-pin because (and this is one of their fundamental sources of revenue) on the whole they make more money on the fees than they lose due to fraudulent transactions.

And it's still endemic in many countries for banks to make exhorbitant penalty charges (which are technically illegal if you apply the usury laws). But, again, banks know that - statistically - there will be enough people who find themselves in temporary financial difficulty, often due to 'unpredictable' events like losing or changing jobs, getting ill, having a baby, etc. And that's when we get stung... hard!

Ironically, it's the poorer people who get hit the hardest - and it's the poorer segment of the market where banks make the biggest profits - if you play the actuarial numbers right.

I'm very cynical about all this, I'm afraid. I've been hit by it personally (but at least I have the satisfaction of occasionally turning around and defaulting on a loan in retaliation for a draconian and unfair 'penalty' fee!)

But what really galls me is that banks - and scammers - play on people's ignorance and gullibility.

So your website is a God send and we should do as much as we can to make it more widely known - especially as permalinks on the more popular dating sites, MSN, yahoo, hotmail, gmail, etc.

But I also feel that the financial institutions should be made liable for fraudulent activity (and shouldn't be allowed to insure against it either, because all that happens is that the costs get spread around amongst lower-to-middle income earners in the economy... the kind of activity which I believe ultimately leads to a major financial crisis... which often means that our children pick up the tab ).

If there were legislation that made it so then companies like Western Union would be far more likely to provide better staff training or even increase salaries. After all, if WU had to refund several times $1,000 due to one of their centers being overly lax about fraud & scam prevention then this represents a huge loss of revenue for that particular center. And it would therefore be worth their while to 'plug that hole' when it becomes enough of a liability to do so...

'Scamwarners' is less an advocacy group and more a group seeking to make a difference now and to provide advice, guidance and education. Trying to change the system is admirable but unlikely to achieve immediate results.

If you want an essay on how the systems should be changed, I could write several books on the subject but it's unlikely to make much difference as the world of finance is changing so quickly and scammers adapt quickly too. To show that I'm no bank stooge, I think the payoff to banks for the introduction of 'chip and pin' was always intended to be the ability to respond to all fraudulent transactions as being the customers' responsibility, but banks are businesses, after all, and can't justify investment without some return.

I'm more sympathetic to your ideas than you might think, and I'm always diving off on some crusade or other, but inevitably I find that making fundamental change is never going to happen. Without going in to detail I was investigating something which most people would consider was closely regulated and respectable. On deeper investugation I tend to believe that that whole area is riddled with fraud and irregularity.

We're less the United Nations and more the Red Cross, as it enables us to make a difference now, and not look to some future date when we might manage to make a change. Inevitably scammers will react more quickly to any changes intended to make life more difficult to them anyway. Even in the past couple of weeks we've seen some novel abuses of modern payment methods, the most recent involving a newly launched pre-payment card.

If I become 'devil's advocate' I could say that the problem is down to people allowing themselves to be misled by scammers into misusing the financial systems - making payments to strangers by WU or MG, disclosing card details, and paying strangers' cheques into their accounts. If we can help to stop people falling for scams we can do the most good, we feel.