Walmart Let Its Money Transfer Services Be Used by Fraudsters: FTC

The complaint is based on information from fraud databases maintained by MoneyGram, Western Union and Ria, claiming more than $197 million in payments that were the subject of fraud complaints from 2013 to 2018 were sent or received at Walmart stores, with more than $1.3 billion in related payments also possibly connected to the fraud. The complaint cites numerous instances in which law enforcement investigations found that scammers relied on Walmart money transfers as a primary way to receive payments, including in telemarketing ploys like IRS impersonation schemes, relative-in-need “grandparent” scams and sweepstakes scams.

Walmart “turned a blind eye while scammers took advantage of its failure to properly secure the money transfer services offered at Walmart stores,” the complaint said, saying the company didn’t train its employees properly, “failed to warn customers, and used procedures that allowed fraudsters to cash out at its stores.” The FTC is asking the court to order Walmart to return money to consumers and to impose civil penalties for Walmart’s violations.

The suit said Walmart acts as an agent for multiple money transfer services, including MoneyGram, Ria and Western Union, offering some services under its own brand. Services include money transfers, credit cards, reloadable debit cards, check cashing and bill payments. The complaint said “tens of millions” of money transfers are sent or received at Walmart stores each year and processed by Walmart employees.

Fraudsters use money transfers to send money to a recipient in another location, which is “nearly impossible to retrieve after the money has been picked up,” said the FTC. The agency has brought multiple cases against money transfer services in recent years, including against MoneyGram and Western Union, alleging they failed to protect consumers who used their services. The FTC vote to file the civil penalty complaint was 3-2, with Republican Commissioners Noah Phillips and Christine Wilson dissenting.

Walmart cited a “narrowly divided” FTC, in a corporate statement Tuesday that blasted the complaint. The commission, said Walmart, brought “this factually flawed and legally baseless civil lawsuit" after Chair Lina Khan "refused Walmart the due process of hearing directly from the company, and even the Justice Department refused to take this case to court.” Walmart claimed an “unprecedented expansion of the FTC’s authority," saying it “seeks to blame Walmart for fraud that the agency already attributed to another company while that company was under the federal government’s direct supervision.” The retailer will defend its “robust anti-fraud efforts,” it said.

The FTC’s decision to pursue Walmart “raises serious questions, including about the government’s own conduct," and the retailer “started asking those questions through a June 3 Freedom of Information Act request,” emailed a Walmart spokesperson. The FOIA request referenced the FTC’s “novel and untested legal theory” that it said represented an “unprecedented expansion of the Agency’s power” based on “significant factual errors.”

In a lengthy Tuesday blog post, Walmart said it has saved customers an estimated $6 billion in fees by bringing competition to the money transfer industry. It has a “robust anti-fraud program to help stop third-party criminals who try to use money transfer services to commit fraud,” the company said, saying only a “miniscule number” of transactions were alleged to be fraudulent. Walmart has stopped “hundreds of thousands” of suspicious transactions totaling “hundreds of millions of dollars,” it said.