MoneyGram 2008 Annual Report Download - page 19

Table of Contents
Litigation or investigations involving MoneyGram or our agents, which could result in material settlements, fines or penalties, may
adversely affect our business, financial condition and results of operations.
The SEC is conducting an informal, non-public inquiry of our financial statements, reporting and disclosures related to our investment
portfolio and offers and negotiations in connection with the Capital Transaction. While the SEC's notice states that it has not determined
that any violations of the securities laws have occurred, there can be no assurance of the outcome of the inquiry. We are also currently the
subject of stockholder litigation, including a securities class action lawsuit and one lawsuit under ERISA. While we believe the suits are
without merit and intend to vigorously defend against such claims, the outcome of the lawsuits cannot be predicted at this time. The cost
to address the SEC inquiry and defend the stockholder and ERISA litigation could be substantial, regardless of the outcome.
Regulatory and judicial proceedings, including risks associated with the SEC inquiry, our failure to comply with certain state regulatory
requirements for a brief period of time prior to the Capital Transaction and potential adverse developments in connection with ongoing
stockholder litigation may adversely affect our business, financial condition and results of operations. There may also be adverse
publicity associated with lawsuits and investigations that could decrease agent and customer acceptance of our services. Additionally, our
business has been in the past, and may be in the future, the subject of class action lawsuits, regulatory actions and investigations and other
general litigation. The outcome of class action lawsuits, regulatory actions and investigations is difficult to assess or quantify. Plaintiffs
or regulatory agencies in these lawsuits, actions or investigations may seek recovery of very large or indeterminate amounts, and the
magnitude of these actions may remain unknown for substantial periods of time. The cost to defend or settle future lawsuits or
investigations may be significant.
An inability of the Company or its agents to maintain adequate banking relationships may adversely affect our business, financial
condition and results of operations.
We rely on domestic and international banks for international cash management, ACH and wire transfer services to pay money transfers
and settle with our agents. We also rely on domestic banks to provide clearing, processing and settlement functions for our paper-based
instruments, including official checks and money orders. The Company's relationships with these banks are a critical component of our
ability to conduct our official check, money order and money transfer businesses. An inability on our part to maintain existing or
establish new banking relationships sufficient to enable us to conduct our official check, money order and money transfer businesses
could adversely affect our business, results of operations and financial condition. There can be no assurance that the Company will be
able to establish and maintain adequate banking relationships.
Three of our eight official check clearing banks have chosen not to renew their clearing agreements with us. Other clearing banks have
sought advance funding or other financial arrangements in order to continue providing clearing services to us. While the loss of our
clearing arrangements with these three clearing banks has not had an adverse effect on our official check business, we may experience
increased costs or significant disruption of our business if we lose additional clearing bank relationships and are unable to establish
adequate clearing bank relationships.
Our primary international bank has informed us of its intent to terminate its relationship with us. We are in the process of migrating to a
new primary international banking relationship for cash management, ACH and wire transfer services. Should we not be successful in
establishing a sufficient relationship with one of the limited number of large international banks that provide these services, we would be
required to establish a global network of banks to provide us with these services. This could alter the pattern of settlement with our agents
and result in our agent receivables and agent payables being outstanding for longer periods than the current remittance schedule thereby
adversely impacting our cash flow and revenue. Maintaining a global network of banks, if necessary, may also increase our overall costs
for banking services.
We and our agents are considered Money Service Businesses in the United States under the Bank Secrecy Act. The federal banking
regulators are increasingly taking the stance that Money Service Businesses, as a class, are high risk. As a result, several financial
institutions, which look to the federal regulators for guidance, have terminated their banking relationships with some of our agents. If our
agents are unable to maintain existing or establish new banking relationships, they may not be able to continue to offer our services which
could adversely affect our results of operations.
16