MoneyGram Proprietary & Confidential. © 2007 MoneyGram. All rights reserved. “Money Services Businesses- Access to the Banking System” Presented to The

MoneyGram Proprietary & Confidential. © 2007 MoneyGram. All rights reserved.

“Money Services Businesses- Access to the Banking

System”

Presented to

The FDIC Committee on Economic Inclusion

October 24, 2007Tom HaiderMoneyGram International


MoneyGram International

Our Purpose:

“To help people and businesses by providing affordable, reliable and

convenient payment services.”

2

MoneyGram InternationalMoneyGram International

Table of Contents

Company Overview

Security vs. Economic Inclusion –

Are they Mutually Exclusive?

Bank Discontinuance

Next Steps


3



Payment services company conducting business in 170 countries through more than 138,000 locations

Core products Money transfers Money orders Official checks

Publicly traded on NYSE $2 billon market cap

Founded in 1940 as Travelers Express – a money order company Merged with MoneyGram in 1998 MoneyGram started by American Express in 1989 Headquartered in Minneapolis

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Money Transfers Consumers

Recent immigrants who want to send money home to their families Debtors who need to pay overdue loan to avoid collection action People who need funds in an emergency Average industry transaction is $300

Sellers MoneyGram’s services are sold through a network of “agent” locations Agents include banks, supermarkets, convenience stores, post offices, and

“mom and pop” retailers 138,000+ agent locations in 170 countries

Fees Consumers can send up to $1,000 to many countries for a flat fee of about $10 A foreign exchange between 1 to 2% is applied to most currency conversions


5

Global Agent PartnersGlobal Agent Partners


6

MoneyGram InternationalMoneyGram InternationalMoney Orders Definition

Payment instrument used in lieu of a personal check to pay regular bills, like rent and utilities

Average face amount is $150

Consumers Low and fixed income Individuals who cannot maintain a bank account Renters whose landlords require payment by money order Small merchants who convert cash to money orders to reduce crime

Sellers Many of the same entities that sell money transfers

55,000 retail locations in all 50 states

Fees Fee is determined by the seller Retail average is less than $1


7


8

Security / Anti - Money Laundering vs. Economic InclusionSecurity / Anti - Money Laundering vs. Economic Inclusion

How can the two interests be brought into balance to better achieve everyone’s goals?

Economic Inclusion

Security / Anti-Money Laundering

Security / Anti – Money Laundering vs. Economic InclusionSecurity / Anti – Money Laundering vs. Economic Inclusion


9

Key Constituencies Law enforcement agencies Regulators Elected officials

Key Issues for MSBs Compliance and training Transaction analysis and reporting Licensing and regulation

Key Constituencies Consumer groups International development programs Elected officials

Key Issues for MSBs

Reduce cost of service Consumer disclosures Increase agent network to make service more easily available and expand service delivery methods

Security/Anti-Money Laundering Economic Inclusion

Security / Anti – Money LaunderingSecurity / Anti – Money Laundering

MoneyGram Action

Know Your Agent Background screening of all agent applicants

Ongoing training and testing of all agents In-person reviews of select agents On-line, computer based refresher training Compliance Program set-up

Continuous investment in technology and staffing Multi-million $ transaction analysis and OFAC screening systems 5% of global workforce dedicated to compliance/regulatory issues


10

MoneyGram Action

Licensed and regulated by 48 State Banking Departments

IRS is primary regulator for Bank Secrecy Act compliance MoneyGram and agents examined by States and IRS

Close cooperation with law enforcement 38,000+ SARs/year 4,000+ CTRs/year 4,500+ information requests/year Regular joint-training programs

Security / Anti – Money LaunderingSecurity / Anti – Money Laundering


11

Tools fro

m

MoneyGram to

Agent

Tools from

MoneyGram to

Agent

MoneyGram Anti-Money Laundering ToolsMoneyGram Anti-Money Laundering Tools

Background Checks

Training

Compliance Program Set-up

On-Site Reviews

MGITransaction

Analysis and OFAC Screening

Agent

Agent Agent

Agent

Transacti

on Inform

ation

Transaction Information

Transaction Information

Transacti

on Inform

ation

Tools fro

m

MoneyGram to

Agent

Tools from

MoneyGram to

Agent


12

How Do MSBs Detect Suspicious Activity?How Do MSBs Detect Suspicious Activity?

13

MoneyGram

= Individual structuring transactions in small amounts at multiple locations. MoneyGram will detect and file SAR/CTR

= Individuals working together to structure transactions may be detected by agent. Regardless whether agent detects, MoneyGram will detect and communicate with agent to ensure filing of SAR/CTR

Agent Agent


Agent

Consumers

Bad Guy Bad GuyBad Guy

CHALLENGE – Regulatory Compliance

Complexity of complying with different interpretations of Federal anti-money laundering laws - Bank Secrecy Act, OFAC Regulations and USA Patriot Act - by 48 State Banking Departments

Security/Anti – Money LaunderingSecurity/Anti – Money Laundering


14

SOLUTION – Federal Licensing

Establish an optional Federal regulator for MSBs that can provide uniformity and efficiencies in compliance



15

CHALLENGE - MSB Definitions

Anti-money laundering laws treat all MSBs the same

Who’s the MSB?

MoneyGram American Express Hilton Hotels Carlson Wagonlit Travel Albertsons Jackson Hewitt Tax Service Bob’s Deli

Objective standards are now overshadowed by complex and often confusing risk-based, subjective requirements



16

SOLUTION - Re-define MSB

Re-define MSBs to facilitate compliance by agents

Treasury Secretary Paulson and FinCEN Director Fries have stated their intent to re-examine the MSB definition

Treasury should adopt a “rules based” approach – not “principles based” – for smaller agents

Rules will improve compliance if MSB service is only an ancillary part of agents’ business

Policies and procedures should not be the priority



17

Security / Anti – Money Laundering vs. Economic InclusionSecurity / Anti – Money Laundering vs. Economic Inclusion


18

Key Constituencies Law enforcement agencies Regulators Elected officials

Key Issues for MSBs Compliance and training Transaction analysis and reporting Licensing and regulation

Key Constituencies Consumer groups International development programs Elected officials

Key Issues for MSBs

Reduce cost of service Consumer disclosures Increase agent network to make service more easily available and expand service delivery methods

Security/Anti-Money Laundering Economic Inclusion

MoneyGram Action

Consumer Cost

Fees and exchange rates have dropped significantly

Simplified pricing has replaced multiple pricing tiers with a flat fee of $9.99 for transactions up to $1000 for Mexico and Latin America, and up to $500 to most other destinations

Economic InclusionEconomic Inclusion


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MoneyGram’s Average Fee Per TransactionMoneyGram’s Average Fee Per Transaction


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$10.00

$12.00

$14.00

$16.00

$18.00

$20.00

$22.00

$24.00

1998 1999 2000 2001 2002 2003 2004

US to Mexico US to LAC All MGI

MoneyGram’s Average Foreign Exchange Rate to MexicoMoneyGram’s Average Foreign Exchange Rate to Mexico

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2001 2002 2003 2004 2005 2006 2007 YTD


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Transaction Volume Growth Trends to MexicoTransaction Volume Growth Trends to Mexico

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%Q

1 20

04

Q2

2004

Q3

2004

Q4

2004

Q1

2005

Q2

2005

Q3

2005

Q4

2005

Q1

2006

Q2

2006

Q3

2006

Q4

2006

Q1

2007

Q2

2007

MoneyGramBanco De Mexico reported overall volume changes


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Consumer Cost

Fees are about as low as they can go without regulatory streamlining



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Money

Transmitters’ Price

Tag

Send Agent Commission

$_____

Receive Agent Commission

$_____

AML Compliance

$_____

Bank Fees for Transmitter

and Agent

$_____

Training

$_____

PC and Telecommunication

for Agent

$_____

Signs, Forms, Receipts

$_____

MoneyGram Action

Consumer Disclosures and Services

Senders receive a receipt showing Amount paid Transaction fee Exchange rate Amount of local currency their recipient will be paid

Senders receive free calling card to notify recipient

Receivers can pick up transaction within minutes after sent

Free, multi-lingual customer service available 24x7



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MoneyGram Action

Service Availability

MoneyGram’s agent network rapidly expanding globally to provide greater consumer convenience

Network is the key to providing consumers with service when and where they want it

Network provides consistency in pricing – MoneyGram receivers are never charged a fee

Network provides consumers certainty that funds will be available

Amount is guaranteed Funds can be picked up within minutes of being sent



25

MoneyGram’s Global Network ExpansionMoneyGram’s Global Network Expansion


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Agent location distribution

2002 2007

135,000

57,000

United States & Canada

Western Europe & Middle East

Eastern EuropeAsia, ISC & Africa

Mexico

LAC

Agent location distribution

2002 2007

135,000

57,000




Mexico

LAC

2002 2007

135,000

57,000




Mexico

LAC

138,000

MoneyGram has invested heavily in building a high-quality agent network

29,40028,000

20,50016,500

37,80028,400

4,7004,000

11,3005,500

9,9004,100

11,4009,500

+5%+5%

+24%+24%

+33%+33%

+17.5%+17.5%

+205%+205%

+241%+241%

+20%+20%

29,40028,000

20,50016,500

37,80028,400

4,7004,000

11,3005,500

9,9004,100

11,4009,500

+5%+5%

+24%+24%

+33%+33%

+17.5%+17.5%

+205%+205%

+241%+241%

+20%+20%

30% year-over-year growth

Legend:

Black = June 2006

Blue = June 2007

Legend:

Black = June 2006

Blue = June 2007

Global Network ExpansionGlobal Network Expansion


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MoneyGram Action

Service Availability

Partnering with banks around the world

U.S. 2,500+ US Bancorp locations

International

Standard Bank in Africa; ICBC in China; Bank Pekao in Poland; Bank of Ireland; Privat Bank in Romania; Rosbank in Russia; etc.



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South American Banking RelationshipsSouth American Banking Relationships

•Banco Itau•Banco Bankpar

Paraguay•Banco Integracion

Uruguay•Exprinter

Argentina

Banco Itau Buen Ayre•Banco Piano

BrazilColombia

•Banco Davivienda

Ecuador•Banco del Pichincha

•Banco del Austro•Banco del Pacifico

•Cooperativa de Ahorro

Peru•Banco Financiero del Peru

•FENACREP

Bolivia

Banco Nacional de Bolivia


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Central American Banking RelationshipsCentral American Banking Relationships

•Banco Atlantida

•BGA

•Banco Mercantil

•Federacion de Cooperativasde Ahorro y Credito

•Banco Fichosa

Honduras

•Banco Atlantida

•BGA

•Banco Mercantil

•Federacion de Cooperativasde Ahorro y Credito

•Banco Fichosa

Honduras

•Banco de Desarrollo Rural

•Banco Industrial

•FENACOAC

Guatemala

•Banco de Desarrollo Rural

•Banco Industrial

•FENACOAC

Guatemala

•Banco Agricola Comercial

•Banco Cuscatlan

•FEDECACES

•ScotiaBank El Salvador

•FEDECREDITO

•Banco ProAmerica

El Salvador

•Banco Agricola Comercial

•Banco Cuscatlan

•FEDECACES

•ScotiaBank El Salvador

•FEDECREDITO

•Banco ProAmerica

El Salvador •Banco de la Producci ón

•Central Cooperativade Ahorro y Credito

•Banco Uno Nicaragua

Nicaragua

•Banco de la Producci ón

•Central Cooperativade Ahorro y Credito

•Banco Uno Nicaragua

Nicaragua

•Banco de San Jose

•Banco De Costa Rica

•Banco BANEX

Costa Rica

•Banco de San Jose

•Banco De Costa Rica

•Banco BANEX

Costa Rica

•Belize Bank

Belize

•Belize Bank

Belize


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Bank Discontinuance

Solving the Bank Discontinuance problem will improve the availability of MSB services

MSB industry - working with bank trade groups - has drafted legislation to address the problem

Regulatory support of legislation will increase the chance of success

Why is legislation needed?

Guidance issued in April 2005 by FinCEN and Federal Banking Agencies did not solve the problem

FFIEC’s BSA/AML Examination Manual does not provide clear examples of when banks do not need to review an MSB’s BSA/AML program



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Banks and MSBs Working Together

MoneyGram seeking opportunities to partner with more banks

Money Orders Money Transfers

Regulators can help by reducing banks’ concerns with MSB accounts

Money transfers can help migrants become banked consumers



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Steps for migrants to become banked

New Migrant

Arrives in US

MigrantBecomes Employed

MigrantBecomes Remitter

MigrantBecomes

Banked and Remits at

Bank which isnow a

MoneyGramAgent

Bank/MoneyGram Agent

MoneyTransmitter

Partners with Bank

Bank

MoneyGram Agent


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Security/Anti – Money Laundering vs. Economic InclusionSecurity/Anti – Money Laundering vs. Economic Inclusion

MGI recommends the Committee on Economic Inclusion

Seek greater uniformity, consistency, and clarity in the regulation of MSBs by allowing MSBs to opt for a federal license

Encourage Treasury to revise the definition of MSBs to facilitate compliance by agents, focusing on a rules-based approach for smaller agents

Encourage greater partnerships and linkages between MSBs and banks

Address the critical issue of MSB banking relationships through further regulatory guidance or Congressional action

Conclusion

MSBs provide vital services to consumers

MSBs work with banks around the world

Money transfer fees have dropped significantly

The regulatory environment influences the ability of MSBs to serve consumers

A balance is needed between ensuring that our nation’s interests are protected through strong AML regulation, while at the same time making sure MSBs are able to serve their consumers

Security/Anti – Money Laundering vs. Economic InclusionSecurity/Anti – Money Laundering vs. Economic Inclusion


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Documents

MoneyGram Proprietary & Confidential. © 2007 MoneyGram. All rights reserved. “Money Services Businesses- Access to the Banking System” Presented to The