FTC Sues Walmart Alleging Money Transfer Services Fraud

In late June, the Federal Trade Commission (FTC) announced filing a suit against Walmart for what they allege as years of money transfer services fraud. In recent years, the FTC has brought multiple cases against money transfer companies for not protecting consumers from fraud. According to the details of the suit, the FTC claims Walmart knowingly allowed the corporation’s money transfer services to be used by scammers who bilked customers out of hundreds of millions of dollars.

Additionally, the FTC alleges Walmart did not properly train employees, failed to warn customers, and allowed fraudsters to cash out in stores through Walmart’s unsafe procedures that granted access. The suit requests that the corporation be held accountable and ordered to return customers’ money along with imposing civil penalties for the violations.

Walmart offers several financial services, including credit card, check cashing, reloadable debit cards, and bill payments in addition to multiple money transfer services. Walmart serves as an agent for MoneyGram, Ria, and Western Union money transfer services, as well as their own brands, Walmart2Walmart and Walmart2World. All transfers in every store are handled by Walmart employees.

Money transfers, which allows people in different locations to send money to one another, are a frequent target of fraudsters. This is not the first time the FTC has targeted fraudulent money transfer scams. In recent years, the government watchdog has brought several cases against transfer services, including Western Union and MoneyGram, citing both companies failed to protect their customers.

What Does the FTC Allege Is Walmart’s Role in Fraudulent Transfers?

The complaint cites fraudulent database information from MoneyGram, Western Union, and Ria show more than $197 million in payments sent from Walmart stores resulted in fraud complaints from 2013 to 2018, with an additional $1.3 billion in related payments believed to be connected to the fraud. The FTC accuses Walmart of looking the other way in order to collect millions of dollars in money transfer fees.

Numerous law enforcement investigations show that fraudsters relied almost exclusively on Walmart’s money transfer services as their primary source to receive payments in scams that included sweepstakes scams, relative-in-need grandparent scams, and scams involving thieves impersonating Internal Revenue Service personnel.

The FTC says Walmart knew of the investigations and related scams but failed to make changes to procedures or the transfer service companies that Walmart represents, harming customers in numerous ways, such as:

• Permitting suspicious payouts: According to the FTC, Walmart’s own earlier policies state that employees must issue payouts even if the transaction appears suspicious. Such a policy leaves the door open for scammers to easily secure fraudulent proceeds in any Walmart store in the country. The company began training employees to spot and deny fraudulent payouts in 2017, but only in a limited number of stores.
• Poor policies: The FTC alleges that Walmart did not have written policies regarding anti-fraud or consumer protection programs until 2014, but cites the company continued to have an ineffective program, violated its own policies and those of their money transfer services partners.
• Large cash payments: Unlike other businesses that offer money transfer services, Walmart permits large cash payouts, according to the FTC complaint, and lax security measures that allowed many fraudsters to receive their payments using fake identification.
• Warning information materials: The FTC alleges that Walmart did not provide consumers with required materials warning of potential scams, nor displayed any such information, at many of its locations. Such material is designed to inform and educate customers to prevent them from sending money to scammers. Additionally, according to the complaint, Walmart discontinued paper sending forms that included safety information and replaced the form with a printout that contains limited small print warning information instead.
• Telemarketing purchases: In 2016, the FTC enacted the Telemarketing Sales Rule, which prohibits the use of money transfers to pay for telemarketing purchases, which are associated with high fraud risks. Walmart has not complied with the provision, according to the complaint.
• Insufficient staff training: The FTC alleges that Walmart’s training programs and materials are unclear or contradictory for the tens of thousands of employees assigned to handle money transfers. Those assigned to handle transfers as back-ups for other employees received no anti-fraud training and limited training for transfers. The complaint states that many employees participated in scams, such as accepting cash tips in exchange for processing fraud payments.

What Is Walmart’s Response to the Allegations?

The company says the allegations are legally flawed and factually misguided, vowing to fight the FTC complaint in court. The company further stated that its anti-fraud efforts have saved customers more than $6 billion in money transfer fees thanks to the company’s actions to drive down prices and ultimately offering a low flat fee.

The company maintains it has a robust anti-fraud program in order to stop fraudulent transaction and has for more than hundreds of thousands of transactions totaling hundreds of millions dollars. The retail giant argues that the policies and systems designed to protect consumers from third-party money transfer scams, resulting in fewer than two out of every 10,000 being reported fraudulent in 2021.

Further, the company states they routinely work with law enforcement and government agencies to fight crime and fraud. They also stated that they were a key player in a joint effort with the U.S. Department of Justice in an investigation and the apprehension of a fraudster who bilked over $3 million out of consumers. The company says it turned the fraudulent funds over to law enforcement.

The company also partners with nonprofit and corporate organizations to collectively help combat and prevent financial services fraud by sharing trends and patterns associated with fraudulent money transfers. Additionally, Walmart is a member of Knoble’s Strategic Board of Advisors, a nonprofit network of financial crime experts, specifically participating in a financial services anti-fraud initiative.

Walmart contests the FTC lawsuit is flawed and shifts blame to the company for reported fraud the FTC previously admitted was caused by a money transfer agency under federal government compliance monitoring at the time, not Walmart. The corporation specifically cites:

• The FTC publicly stated in 2018 that the money transfer company, MoneyGram, violated a 2009 FTC consent order, failing to prevent millions of dollars in fraudulent transactions.
• The 18-month time period during which the lawsuit claims Walmart ignored fraud, MoneyGram’s fraud-detecting system was inoperable, outlined in the same 2009 civil action lawsuit.
• The FTC publicly acknowledged the 18-month system failure of MoneyGram’s fraud detection system, designed to withhold transactions and refuse payouts of suspected fraudulent transfers, allowing millions of dollars in payouts during a period when the company was under an FTC consent order and a federal government compliance monitor.

Walmart denies the lawsuit’s claims that it does not provide resources educating and warning customers about financial services fraud and how to recognize a scam. According to the company, warnings are publicly posted in stores, fraud-warning brochures are available in English and Spanish, and they play fraud warning videos on prominent big-screen televisions in over 3,700 stores. The videos are shown continuously in the money services and customer service desks and inform customers about multiple types of financial scams.

Customers are also given written information prior to the completion of money transfers which contains warnings and contact information in order for customers to report fraud. Customers making money transfers through Walmart’s website are also given fraud warning information during the online process. The retailer’s website also contains a Fraud Information section to educated customers on the types and techniques of scams fraudsters typically employ and links to government agencies to report any fraudulent transactions or schemes.

Walmart also disputes the allegations over employee training programs related to money transfer transactions, stating the FTC’s claim is largely based on a typographical error on one page of the company’s training manual. The company says employee training is, in fact, the exact opposite of what the FTC claims in the lawsuit.

Pittsburgh Consumer Fraud Attorneys at East End Trial Group Advocate for Clients Defrauded in Money Transfer Scams

If you believe you have been the victim of a money transfer scam, one of our seasoned Pittsburgh consumer fraud attorneys at East End Trial Group will help you fight back against fraudsters. Call us at 412-223-5740 or contact us online to schedule a free consultation. Located in Pittsburgh, we serve clients throughout Pennsylvania.