FTC sues Walmart for facilitating money transfer fraud that stole hundreds of millions of customers


Press release
July 5, 2022

The Federal Trade Commission sued Walmart on June 28 for allowing the use of its money transfer services by fraudsters, who stole hundreds of millions of dollars from consumers. In its lawsuit, the FTC alleges that for years the company turned a blind eye as scammers took advantage of its failure to properly secure money transfer services offered at Walmart stores. The company failed to properly train its employees, fail to warn customers, and used procedures to allow fraudsters to withdraw cash from its stores, according to the FTC complaint. The FTC is asking the court to order Walmart to return money to consumers and impose civil penalties for Walmart’s violations.

“As scammers used its money transfer services to make money, Walmart looked the other way and pocketed millions in fees,” said Samuel Levine, director of the FTC’s Consumer Protection Bureau. . “Consumers lost hundreds of millions, and the Commission holds Walmart responsible for letting fraudsters defraud its customers.”

In addition to its retail business, Walmart offers consumer financial services in its stores, including money transfers, credit cards, reloadable debit cards, check cashing, bill payment, etc Walmart acts as an agent for several money transfer services, including MoneyGram, Ria and Western Union, offering some services under its own brand, such as “Walmart2Walmart” and “Walmart2World”. According to the complaint, tens of millions of money transfers are sent or received each year at Walmart stores, where they are processed by Walmart employees.

Money transfers are services that people use to send money to a recipient in another location. They are frequently used by fraudsters in a wide variety of scams, as they are almost impossible to recover once the money is collected. The FTC has filed several lawsuits against money transfer services in recent years, including against MoneyGram and Western Union, alleging they failed to protect consumers who use their services.

Walmart’s practice of turning a blind eye to fraud has had serious consequences for consumers, according to the complaint. The complaint cites numerous instances in which law enforcement investigations found that scammers relied on Walmart money transfers as their primary means of receiving payments, including in telemarketing programs such as Schemes impersonation scams, needy “grandparents” scams, pageant scams, and others. . Based on information from fraud databases maintained by MoneyGram, Western Union, and Ria, from 2013 to 2018, more than $197 million in payments complained of fraud were sent or received at Walmart, with over $1.3 billion in related payments. related to fraud.

The FTC’s investigation into Walmart’s money transfer practices showed, according to the complaint, that Walmart was aware of the role money transfer services play in scams and fraud. Despite this, the company’s money transfer services have harmed consumers in many ways, including:

  • Authorize the payment of suspicious transfers: For years, according to the complaint, Walmart’s stated policy was for its employees to issue payments even in the event of a suspicious money transfer, making it easy for scammers to recover fraudulent products from a Walmart store. The complaint cites a Walmart reference guide for employees which stated: “If you suspect fraud, complete the transaction.” Walmart didn’t begin training employees to refuse fraudulent payments until at least May 2017, but even then it only provided such training to employees in a limited number of locations.
  • Not having an anti-fraud policy or an ineffective and poorly applied policy: According to the complaint, despite offering money transfer services for many years, Walmart did not have a written fraud or consumer protection program until November 2014. After that time, the complaint cites numerous instances in which Walmart failed to have an effective program or violated its own policies, as well as the policies of its partners, such as MoneyGram, which were apparently in place to protect consumers from fraud.
  • Allow cash withdrawals for large payments: The complaint notes that Walmart, unlike most other outlets where money transfers can be received, even pays large payments in cash. Additionally, the complaint notes that the scammers were often able to recover their payments from Walmart using fake IDs. This has made it an attractive option for fraudsters looking to conceal their identity.
  • Do not provide material to prevent consumers from sending fraudulent payments: According to the complaint, Walmart failed to display or provide required materials to consumers in many of its locations that could have warned them of potential fraud and prevented them from sending money to the scammers. More recently, the company stopped using a paper “submission form” containing important information for consumers to help them realize they could be making a bogus payment, replacing it with a printout containing only fine print warnings.
  • Not effectively training or retraining staff: The complaint alleges that Walmart’s training materials for the tens of thousands of employees who have worked with money transfers were often contradictory or unclear. In many cases, employees authorized to handle money transfers as “substitutes” have received no anti-fraud training or only limited transfer training. The complaint notes that, in some cases, Walmart staff were complicit or complicit in scams, accepting cash tips from scammers in exchange for processing fraudulent payments or being directly involved in the scams themselves.
  • Allow money transfers to be used for telemarketing purchases: The FTC’s Telemarketing Sales Rule has since 2016 prohibited money transfers from being used to pay for telemarketing purchases due to the high risk of fraud. But the complaint alleges that, for years, Walmart failed to take steps to comply with this provision.

The Commission’s vote to file the civil penalty complaint was 3 to 2, with Commissioners Noah Joshua Phillips and Christine S. Wilson dissenting. The FTC filed the complaint in the US District Court for the Northern District of Illinois.


Comments are closed.