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FTC sues Walmart for alleged money transfer fraud

Walmart is denying FTC claims it enabled consumer fraud.

Walmart is denying accusations from the Federal Trade Commission that it allowed scammers to defraud consumers via its money transfer services.

In a complaint filed in a U.S. district court in the Northern District of Illinois, the FTC accused the retail giant of looking the other way while scammers hijacked its money transfer business. The FTC vote to file the civil penalty complaint was 3-2.

In an official blog post, the FTC said that Walmart turned a “blind eye” while criminals “fleeced consumers out of hundreds of millions of dollars” as a result of failure to properly secure the money transfer services offered at Walmart stores.

In its lawsuit, filed the complaint in the U.S. District Court for the Northern District of Illinois.

The FTC alleges Walmart did not properly train its employees, failed to warn customers, and used procedures that allowed fraudsters to cash out at its stores. The FTC is asking for Walmart to return money to consumers and to face civil penalties for these violations.

The FTC complaint cites instances in which law enforcement investigations allegedly 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, and sweepstakes scams.

Based on information from fraud databases maintained by MoneyGram, Western Union and Ria, from 2013 to 2018, the FTC alleges that 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.

Walmart responds to FTC claims
In a lengthy corporate blog post, Walmart denied the FTC’s allegations and accused the agency of blaming it for illegal actions taken by third parties. Walmart says it has saved consumers—including the unbanked and underbanked— an estimated $6 billion in fees by bringing “important competition” to the money transfer industry.

“Walmart has a robust anti-fraud program to help stop third-party criminals who try to use money transfer services to commit fraud, and only a miniscule number of transactions are even alleged to be fraudulent,” the company said in the blog post. “In fact, Walmart has stopped hundreds of thousands of suspicious transactions totaling hundreds of millions of dollars.”

In addition, Walmart says it “routinely works” with law enforcement and government agencies to stop fraud and other crime. Walmart also accuses FTC chair Lina Khan refused of refusing it the due process of hearing directly from the company, and filing the suit after the Department of Justice refused to take this case to court. Walmart says it will defend against this lawsuit “aggressively.”

Walmart began offering money transfer services in 2014. More recent financial services developments include the 2021 launch of a partnership with Western Union, as well as backing a fintech startup in collaboration with Ribbit Capital.

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