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MoneyGram Fraud - Responsibility

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We offer MoneyGram services at our convenience store in Arkansas. A fraudster called our employee and conned into transferring over $10,500 to some random people. 

We did sign a contract with MoneyGram essentially stating that "we agree to safeguard and be responsible for all MoneyGram funds lost for any reason, including theft or fraud". 

While we do not dispute the above, here are other relevant facts:
1. When we were setting up originally, MoneyGram made us create new access codes for employees to login and process money transactions. 
2. We did not give access or access codes to this particular employee to login and perform transactions 
3. The fraudster gave the access code to employee to login and process transactions.
4. We later realized that there is a default access code for the computer. MoneyGram neither disable this code nor inform us.

If not for this default code, there is no way these fraudulent transactions could have taken place. Is there anyway we can fight MoneyGram in taking up the responsibility or do we just take it up on us and pay all of the money to MoneyGram. 

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I have a feeling that this would all fall on to you.  I'm sure somewhere in the MoneyGram paperwork it says that you're responsible for safeguarding the system and you agreed to it.  There are multiple point of failures here: 1. Your unauthorized employees logging into MG to conduct the transaction 2. Transaction over the phone with an unknown individual 3. Not replacing default id/password.  Could the employee be involved in the scheme? 

Edited to fix a typo: Unauthorized.

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That's true, but I would probably consider talking to a lawyer if MoneyGram won't negotiate at least a shared loss. It seems like a stupid security hole for MG to even allow a default login and maybe there is some legal basis in that negligence.

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ach1199 said:   I have a feeling that this would all fall on to you.  I'm sure somewhere in the MoneyGram paperwork it says that you're responsible for safeguarding the system and you agreed to it.  There are multiple point of failures here: 1. Your authorized employees logging into MG to conduct the transaction 2. Transaction over the phone with an unknown individual 3. Not replacing default id/password.  Could the employee be involved in the scheme? 
  (1) He did NOT give that employee an access code.  Therefore, the employee was NOT authorized to conduct the MG transaction.

(2) The employee is stupid, naive or complicit.  Nevertheless, she was NOT authorized to conduct that transaction, since an access code was NOT given to her.

(3) OP stated that MG had NOT told him about a default PW.  As a result, how could he have changed something he did NOT know existed?

(4) As stated, the employee is stupid, naive or complicit.  It's AR.  So assume stupidity/naivety, since her brother is her dad.

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I feel like MoneyGram should have some responsibility here, I mean who puts a generic access code on a live account? Doesn't that defeat the purpose of having an access code? That would be like a bank setting all default debit card PINs to 1234.

I can see the user having the onus of safeguarding the system but it's MoneyGram's responsibility to ensure they take proper security measures. You shouldn't be able to put in easily breakable safeguards and take no responsibility.

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OP sorry for your loss and pain.

But wait a sec here: don't you have some sort of commercial insurance that covers theft? isn't this a theft .. ofcourse this was not your typical theft instead this was a sophisticated theft that took your employee along for a ride.
Now, if it gets discovered that this employee himself/herself was compromised then it's a different story

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I suspect the responsibility lies with you as the Agent. Section 1: Agent Compliance Training

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dealgain said:   OP sorry for your loss and pain.

But wait a sec here: don't you have some sort of commercial insurance that covers theft? isn't this a theft .. ofcourse this was not your typical theft instead this was a sophisticated theft that took your employee along for a ride.
Now, if it gets discovered that this employee himself/herself was compromised then it's a different story

  Thank you for all your replies.
I wish all insurances are the same with same coverages. They are not. There are several clauses. There  is no tangible property/money loss/theft here and the fraudster was not even the store. And add "online" to the mix.   

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My mistake in the reply above....I meant to say your "unauthorized employee", not "authorized employee". 

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My wife used Moneygram for years but switched to Xoom.

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Unbelievable! So, your employee just did everything a stranger told him/her to do over the phone?

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minggang said:   Unbelievable! So, your employee just did everything a stranger told him/her to do over the phone?
  By that measure, OP was very fortunate

https://en.wikipedia.org/wiki/Strip_search_phone_call_scam
 The strip search phone call scam is a series of incidents that extended over a period of about ten years before an arrest was made in 2004. The incidents involved a man prank calling a restaurant or grocery store, claiming to be a police officer and then convincing managers to conduct strip searches of female employees, and to perform other bizarre acts on behalf of "the police".

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minggang said:   Unbelievable! So, your employee just did everything a stranger told him/her to do over the phone?
  Especially since they were not authorized to begin with.  "fired" to the employee and the suck part will be you'll end up paying their unemployment. 
 

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minggang said:   Unbelievable! So, your employee just did everything a stranger told him/her to do over the phone?
  
Probably "ex-employee" now.

I'm guessing this was some sort of social engineering situation.

1 - employee at the convenience store was probably a minimum wage worker and not that bright
2 - fraudster calls, saying he's from MoneyGram and provides instructions to the employee.  Scares employee by saying if they don't follow the instructions immediately (to "test" or "upgrade" the system), the business owner will be charged a penalty by MoneyGram, or service will go down, or some other scare tactic that makes the employee think they will get in trouble for not following along.  A manager or bright employee will say no many times, but it just takes 1 employee like in OPs case for the fraudster to get $10k quickly.

Not saying employee has an excuse, but this type of thing (social engineering of businesses) is more common than people realize.
 

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Also, MoneyGram will probably drop you if you sue them. How much is that worth to you?

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civ2k1 said:   
minggang said:   Unbelievable! So, your employee just did everything a stranger told him/her to do over the phone?
  
Probably "ex-employee" now.

I'm guessing this was some sort of social engineering situation.

1 - employee at the convenience store was probably a minimum wage worker and not that bright
2 - fraudster calls, saying he's from MoneyGram and provides instructions to the employee.  Scares employee by saying if they don't follow the instructions immediately (to "test" or "upgrade" the system), the business owner will be charged a penalty by MoneyGram, or service will go down, or some other scare tactic that makes the employee think they will get in trouble for not following along.  A manager or bright employee will say no many times, but it just takes 1 employee like in OPs case for the fraudster to get $10k quickly.

Not saying employee has an excuse, but this type of thing (social engineering of businesses) is more common than people realize.

  
Another thought ... anyone remember the toner scam?

Guy calls pretending to be the "regular toner supply company" and gets the employee to provide model number/serial number of copier (for "verification"), then sends a toner cartridge.  Followed later by a highly marked up invoice (2-5x retail) for that toner (with employee's name listed as the authorizing employee and serial number as proof).  By that time the cartridge is already opened and business is kinda stuck.
 

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Seems like regulators, attorneys general, and class-action attorneys would be interested in your experience...

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Used to work at a major retailer that did this

We had a big sign and a training class that said if you are on the phone with anyone and use the machine. You are fired

They are really smooth and really convincing

I was the regional manager

I had people call and impersonate me and try to direct employees to "test the machine, or update the software"

Bad deal

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civ2k1 said:     
Another thought ... anyone remember the toner scam?

Guy calls pretending to be the "regular toner supply company" and gets the employee to provide model number/serial number of copier (for "verification"), then sends a toner cartridge.  Followed later by a highly marked up invoice (2-5x retail) for that toner (with employee's name listed as the authorizing employee and serial number as proof).  By that time the cartridge is already opened and business is kinda stuck.

  I just got one this past year.  It was like, hey, you guys still around and didn't move to other type of scam?

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OP,

Here's an example of how thieves were able to drain Tranax ATM's using information found in the manual.
https://www.wired.com/2014/11/nashville/

I would think there is an analogy here in terms of liability (albeit not a perfect one). This could be a starting point for researching if there is any possible relief for you and what type of lawyer needs to be involved to help you.

I do not know the outcome on who ate the losses in most cases and if factors like default passwords or atm placement made a difference.

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