Walmart let scammers use money transfer services to fleece people, FTC says

Walmart let criminals use its money transfer services to scam consumers out of hundreds of millions of dollars while collecting fees on the transactions, the Federal Trade Commission alleged Tuesday in filing a lawsuit against the nation's biggest retailer.

Walmart for years turned a blind eye while scammers exploited its failure to properly secure the money transfer services offered at the company's stores, the agency said in announcing the suit. The company did not adequately train its employees, failed to warn customers and used procedures that allowed fraudsters to cash out at its stores, the FTC said in its complaint.

Previous law enforcement investigations have found that Walmart money transfers are a common vehicle for criminals to cash out in a range of telemarketing schemes, according to the civil complaint. 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 possibly connected to the fraud, said the FTC, citing data from MoneyGram, Western Union and Ria.  

The FTC is asking the court to order Walmart to return money to consumers and to impose civil penalties for the violations.

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

FTC suit "factually misguided," Walmart says

Walmart vowed to fight the FTC's suit it in court, with a spokesperson for the company calling the allegations "factually misguided and legally flawed."

The FTC is looking 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 said in a statement. 

In June, lawyers representing Walmart also filed a Freedom of Information Act request seeking information from the FTC.

"The FTC appears poised to pursue a novel and untested legal theory against Walmart that would represent an unprecedented expansion of the agency's power — and will do so based on significant factual errors and to address a significant amount of reported fraud that the agency already publicly attributed to other actors, not Walmart," attorney Sean Berkowitz of Latham & Watkins said in the FOIA request. 

Walmart offers financial services including money transfers in its stores, acting as an agent for services including MoneyGram, Ria and Western Union. It also offers such services under its own brand like "Walmart2Walmart" and "Walmart2World."

Money transfers allow people to send money to someone at another location, and are often used by criminals because they are nearly impossible to trace once the cash has been picked up, according to the FTC. The agency has brought multiple cases against payments companies in recent years, including MoneyGram and Western Union, alleging they failed to protect consumers. 

Walmart's anti-fraud efforts help to protect consumers, who have also been spared an estimated $6 billion in money transfer fees due to its efforts to drive down prices, according to the company.