MoneyGram Posts Q3 Loss; To Pay $125 Mln For Violating Terms Of 2012 Settlement

MoneyGram International Inc. (MGI) reported that its third-quarter net loss was $20.9 million compared to net income of $7.7 million for third quarter 2017. Loss per share was $0.32 compared to earnings per share of $0.12 in the third quarter 2017.

Meanwhile, the U.S. Justice Department said MoneyGram has agreed to extend its deferred prosecution agreement and forfeit $125 million due to significant weaknesses in MoneyGram’s anti-fraud and anti-money laundering (AML) program resulting in MoneyGram’s breach of its 2012 deferred prosecution agreement (DPA).
In addition to the monetary payment and extension of the deferred prosecution agreement, the company must enhance its anti-fraud and AML compliance programs.

A two-count felony criminal information was filed on November 9, 2012, in the Middle District of Pennsylvania charging MoneyGram with willfully failing to maintain an effective AML program and aiding and abetting wire fraud. The government agreed to defer prosecution on the information for five years provided MoneyGram complied with the DPA. Today’s amendment to the agreement will extend the term of the DPA for 30 months.

According to court documents filed in 2012, MoneyGram was involved in consumer fraud schemes perpetrated by corrupt MoneyGram agents and others. In the fraud scams, which generally targeted the elderly and other vulnerable groups, perpetrators contacted victims in the United States and falsely posed as victim’s relatives in urgent need of money, falsely promised large cash prizes, or promised items for sale over the internet at deeply discounted prices. The perpetrators required the victims to send funds through MoneyGram’s money transfer system.

According to the joint motion filed today to extend and amend the DPA, MoneyGram breached its 2012 DPA. During the course of the DPA, MoneyGram experienced significant weaknesses in its AML and anti-fraud program, inadequately disclosed these weaknesses to the government, and failed to complete all of the DPA’s required enhanced compliance undertakings.

As a result of its failures, MoneyGram processed at least $125 million in additional consumer fraud transactions between April 2015 and October 2016.

MoneyGram reported that its third-quarter adjusted earnings per share was $0.24, unchanged from last year.

In the first quarter of 2018, the company initiated a restructuring and reorganization program as part of its Digital Transformation initiative. The company incurred $1.2 million of expenses in the third quarter and has incurred $14.0 million for the year. The company expects to spend an additional $2.5 million to $5.5 million over the life of the program. The company expects efficiencies that will result in $30 million of expense reductions in 2018 and, upon completion, $45 million on an annualized basis.

Total revenue of $347.2 million declined 13% on a reported basis and 12% on a constant currency basis compared to third quarter 2017.

Analysts polled by Thomson Reuters expected the company to report earnings of $0.15 per share and revenues of $378.74 million for the third-quarter. Analysts’ estimates typically exclude special items.

The company revised its full year estimates for 2018. Revenue is expected to decline approximately 10 percent on a constant currency basis. Adjusted EBITDA is expected to decline approximately 15 percent on a constant currency basis.

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