FTC Sues Walmart for Allegedly Allowing Fraudulent Money Transfers

Walmart shoppers in Irvine, Calif., on Dec. 22, 2020. John Fredricks/The Epoch Times

The Federal Trade Commission (FTC) announced Tuesday that it has sued Walmart for allegedly allowing its money transfer services to be used for fraud, enabling scammers to con people out of hundreds of millions of dollars.

In the lawsuit (pdf), the retail giant is accused of turning a blind eye through failure to properly secure the transfer procedures offered at Walmart stores. The alleged lapse allowed scammers to take advantage of the situation and “cash out” at the stores. The FTC also claimed that Walmart did not train its staff or warn customers.

“While scammers used its money transfer services to make off with cash, Walmart looked the other way and pocketed millions in fees,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “Consumers have lost hundreds of millions, and the Commission is holding Walmart accountable for letting fraudsters fleece its customers.”

The Arkansas-based retailer has called the litigation “factually flawed and legally baseless,” after the FTC refusing to hear directly from the company. Walmart claimed the agency points at issues which have already been attributed to another company that was under “the federal government’s direct supervision.”

Walmart said that it “will defend the company’s robust anti-fraud efforts” and low prices that have “saved consumers an estimated $6 billion in money transfer fees.” The retailer also protested against the FTC’s “unprecedented expansion” of authority.

Faulty Transfers

Walmart offers financial services including money transfers, check cashing, and bill payments to consumers in its retail outlets. It offers some services under its own brands and others through acting as an agent for MoneyGram, Ria, and Western Union.

Scam artists make use of these services because they are nearly impossible to track down once the transfer is completed and money is picked up. The FTC has brought up cases against MoneyGram and Western Union earlier for allegedly allowing this to happen and failing to protect customers.

In the complaint, the agency claims scammers used Walmart money transfers as the main channel for “telemarketing schemes like IRS impersonation schemes, relative-in-need ‘grandparent’ scams, sweepstakes scams,” and others.

From 2013 to 2018, Walmart processed more than $197 million in payments “that were the subject of fraud complaints,” in addition to over $1.3 billion in related payments, according to the FTC.

Did Walmart Know?

The FTC claims Walmart “knew” about its role but nonetheless allowed suspicious transfers. Employees processed tens of millions of money transfers each year but were not trained to deny fraudulent payouts until at least May 2017.

“The complaint notes that in some instances Walmart staff were complacent or complicit in scams, accepting cash tips from scammers in exchange for processing fraudulent payments or being directly involved in the scams themselves,” according to a press release.

Walmart opposed the agency’s stance on training in a June 28 announcement, in which it said the FTC’s lawsuit “wrongly claims that Walmart did not train associates to deny payouts to suspected fraudsters.”

Walmart did not have an anti-fraud policy or it was poorly enforced, said the complaint. It allowed cash pickups for large amounts, which scammers took advantage of using fake IDs.

The agency has asked the court to order the company to return money back to consumers while imposing civil penalties for the violations.

The FTC lawsuit filed with a 3–2 vote—which Walmart claims was “narrowly divided”—was supported by three Democrats on the panel and opposed by two Republicans.

“Despite the fact that the Justice Department took a pass on this lawsuit and two of the FTC’s own Commissioners voted against it, the FTC has unfortunately chosen to pursue a misguided lawsuit that distorts existing law by attempting to hold Walmart strictly liable for the wrongdoing of third-party criminals, despite all our efforts to stop fraudsters,” said the company. “Walmart will defend against this lawsuit aggressively.”