Walmart accused of turning blind eye to transfer fraud totaling millions of dollars

Store giant brands watchdog's lawsuit 'factually misguided, legally flawed'

America's Federal Trade Commission has sued Walmart, claiming it turned a blind eye to fraudsters using its money transfer services to con folks out of "hundreds of millions of dollars."

In a lawsuit [PDF] filed Tuesday, the regulator claimed the superstore giant is "well aware" of telemarketing fraudsters and other scammers convincing victims to part with their hard-earned cash via its services, with the money being funneled to domestic and international crime rings.

Walmart is accused of allowing these fraudulent money transfers to continue, failing to warn people to be on their guard, and failing to adopt policies and train employees on how to prevent these types of hustles.

The FTC wants the courts to order Walmart to return the money to victims and make the corporation cough up penalties for, in the regulator's view, breaking the FTC Act and Telemarketing and Consumer Fraud and Abuse Prevention Act.

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

Walmart, unsurprisingly, has a different version of events.

"This lawsuit is factually misguided and legally flawed and Walmart will defend against it aggressively," a spokesperson told The Register.

"Claiming an unprecedented expansion of the FTC's authority, the agency 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 company added in a canned statement.

"Walmart will defend the company's robust anti-fraud efforts that have helped protect countless consumers, all while Walmart has driven down prices and saved consumers an estimated $6 billion in money transfer fees," it continued.

That other company mentioned in Walmart's statement is presumably MoneyGram or Western Union, both of which settled with the FTC for hundreds of millions of dollars after the agency took them to court on similar charges.

Walmart also offers money transfer services through both MoneyGram and Western Union at its US and Mexico locations. 

Last year, MoneyGram agreed to pay $125 million to refund consumers and settle a 2009 case with the FTC. And in 2017, Western Union agreed to forfeit $586 million after the FTC and Justice Department sued it for money laundering and consumer fraud.

In addition to its retail business, Walmart offers financial services in its stores. These include, among other things, money transfers, and Walmart acts as an agent for such services via companies including MoneyGram, Western Union and Ria, in addition to offering some services under its own brands: Walmart2Walmart and Walmart2World. 

From 2013 to 2018, MoneyGram, Ria, and Western Union received at least 226,679 complaints about fraud-induced money transfers sent from or received at a Walmart store, according to this latest lawsuit, which cites information in the three transfer services' databases. These complaints totaled more than $197 million, according to the FTC, with the average individual consumer fraud loss coming in around $870. 

However, "these complaints represent only a small percentage of the actual fraud perpetrated through money transfers sent from or received at Walmart locations," according to the lawsuit, which added: "Historically, Walmart has been responsible for more complaints about fraud-induced money transfers than any other agent worldwide."

Additionally, Walmart charges a fee to send a money transfer. The lawsuit alleges "Walmart has earned millions of dollars in these fees to date." ®

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