MoneyGram 2005 Annual Report Download - page 13

Table of Contents
affect our business, financial condition and results of operations.
Our business has in the past been, and may in the future continue to be, the subject of class actions, regulatory actions, investigations or other litigation. The
outcome of class action lawsuits, regulatory actions or investigations is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery
of very large or indeterminate amounts, and the magnitude of lawsuits and actions may remain unknown for substantial periods of time. The cost to defend
future lawsuits or investigations may be significant. There may also be adverse publicity associated with lawsuits and investigations that could decrease
customer acceptance of our services. As a result, litigation or investigations may adversely affect our business, financial condition and results of operations.
We face intense competition, and if we are unable to continue to compete effectively, our business, financial condition and results of operations would be
adversely affected.
The industries in which we compete are highly competitive, and we face a variety of competitors across our businesses. In addition, new competitors or
alliances among established companies may emerge. Our primary competition comes from First Data Corporation and its subsidiaries, including Western
Union, which has substantially greater transaction volume than we do. First Data Corporation and its subsidiaries have a larger agent base, a more established
brand name and substantially greater financial and marketing resources than we do. First Data Corporation has announced that it will spin off Western Union.
We cannot anticipate what, if any, effect the spin-off will have on our business or the money transfer industry.
The Global Funds Transfer segment of our business competes in a concentrated industry, with a small number of large competitors and a large number small,
niche competitors. Our large competitors are other providers of money orders and money transfer services, including Western Union, other subsidiaries of
First Data Corporation and the U.S. Postal Service with respect to money orders. We also compete with banks and niche person-to-person money transfer
service providers that serve select send and receive corridors.
The Payment Systems segment of our business competes in a concentrated industry with a small number of large competitors. Our competitors in this segment
are Integrated Payment Systems, a subsidiary of First Data Corporation, and Federal Home Loan Banks. We also compete with financial institutions that have
developed internal processing capabilities or services similar to ours and do not outsource these services.
Recent levels of growth in consumer money transfer transactions and other payment products may not continue. In addition, consolidation among payment
services companies has occurred and could continue. If we are unable to compete effectively in the changing marketplace, our business, financial condition
and results of operations would be adversely affected.
We are subject to a number of risks relating to U.S. federal and state regulatory requirements which could result in material settlements, fines or penalties
or changes in our business operations that may adversely affect our business, financial condition and results of operations.
In the United States, the money transfer business is subject to a variety of state regulations. We are also subject to U.S. federal anti-money laundering laws
and the requirements of the Office of Foreign Assets Control, which prohibit us from transmitting money to specified countries or on behalf of prohibited
individuals. If we were to inadvertently transmit money on behalf of, or unknowingly conduct business with, a prohibited individual, we could be required to
pay significant damages, including fines and penalties. The USA PATRIOT Act mandates several anti-money laundering requirements. Any intentional or
negligent violation of anti-money laundering laws by our employees could lead to significant fines and/or penalties, and could limit our ability to conduct
business in some jurisdictions. The federal government or the states may elect to impose additional anti-money laundering requirements. Changes in laws,
regulations or other industry practices and standards may occur which could increase our compliance and other costs of doing business, could require
significant systems redevelopment, reduce the market for or value of our products or services or render our products or services less profitable or obsolete,
and could have an adverse effect on our results of operations. If onerous regulatory requirements were imposed on our agents, they could lead to a loss of
agents, which, in turn, could lead to a loss of retail business.
Failure to comply with the laws and regulatory requirements of federal and state regulatory authorities could result in, among other things, revocation of
required licenses or registrations, loss of approved status, termination of contracts with banks or retail representatives, administrative enforcement actions
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