On June 28, 2022, the FTC sued Walmart for allowing its money transfer services to be used by fraudsters, who swindled consumers out of hundreds of millions of dollars. In its lawsuit, the FTC alleges that the company turned a blind eye while scammers took advantage of its failure to properly secure the money transfer services offered at Walmart stores. The FTC is asking the court to order Walmart to return money to consumers and to impose civil penalties for Walmart’s violations.
Walmart offers a number of financial services to consumers in its stores including acting as an agent for multiple money transfer services. According to the complaint, tens of millions of money transfers are sent or received at Walmart stores each year, where they are processed by Walmart employees. 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 schemes like IRS impersonation schemes, relative-in-need “grandparent” scams, sweepstakes 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 that were the subject of fraud complaints were sent or received at Walmart, with more than $1.3 billion in related payments also possibly connected to the fraud.
According to the complaint, based on FTC’s investigation, Walmart knew about the role money transfer services play in scams and frauds. The complaint cited numerous ways on how the company’s money transfer services harmed consumers, including:
Allowing the payout of suspicious transfers. A Walmart reference guide for employees stated: “If you suspect fraud, complete the transaction.” and Walmart did not begin training employees to deny fraudulent payouts until at least May 2017.
Having no anti-fraud policy or an ineffective, poorly enforced policy. Walmart did not have a written anti-fraud or consumer protection program until November 2014. Even after that, Walmart still violated its own policies, as well as the policies of its partners, like MoneyGram, that were placed to protect consumers from fraud.
Allowing cash pickups for large payments. Walmart pays even large payments in cash and scammers were often able to retrieve their payments from Walmart by using fake IDs.
Not providing materials to prevent consumers from sending fraudulent payments. Walmart failed to display or provide required materials to consumers at many of its locations that could have warned them about potential frauds and stopped them from sending money to scammers.
Failing to effectively train or retrain staff. Walmart’s training materials for its employees involved with money transfers were often contradictory or unclear. In many cases, employees who were authorized to handle money transfers as “backups” received no anti-fraud training at all or only limited training related to transfers.
Allowing money transfers to be used for telemarketing purchases. For years, Walmart failed to take steps to comply with FTC’s Telemarketing Sales Rule.
Read the FTC’s press release here.
The original complaint can be found here.