FTC lawsuit: Walmart stores turn 'blind eye' to wire transfer fraud, enable millions in scams
Walmart employees were trained to "turn a blind eye" when criminals used their money transfer services for fraud, and in some cases, store workers were in on it, claims the Federal Trade Commission in a federal lawsuit filed Tuesday. At one point, Walmart's written policy stated, "If you suspect fraud, complete the transaction," the lawsuit says.
Between 2015 and 2019, more than 100 locations process more than $100,000 each in fraudulent transactions, and at some locations, more than half of all transfer activity was fraudulent, the FTC claims. Meanwhile, required employee fraud-fighting training was either inadequate or nonexistent in roughly half of Walmart stores, the suit alleges.
"Walmart has provided an essential service to fraudulent telemarketers, sellers, and con artists," the lawsuit says.
Walmart said in a statement the suit is "factually flawed and legally baseless."
The FTC lawsuit claims Walmart had played a critical role in enabling millions of dollars in common scams, including “grandparent” scams, lottery scams, and government / IRS agent impersonator scams -- many which typically target older Americans.
“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.”
The lawsuit claims Walmart's role in enabling fraud is enormous. Between 2013 and 2018, Walmart processed $200 million in known frauds and more than $1.3 billion in suspected fraud, the lawsuit claims. During that span, $20 million in fraud was sent related to grandparent scams via MoneyGram locations at Walmarts, the suit claims.
"Historically, Walmart has been responsible for more complaints about fraud-induced money transfers than any other agent worldwide," it says. "For example, for MoneyGram, between January 1, 2013 and December 31, 2018, Walmart was responsible for approximately 56 percent of all complaints about fraud-induced money transfers through MoneyGram worldwide."
The suit puts the blame partly on Walmart's high employee turnover rate, which makes it challenging to maintain staff training levels. Roughly 60,000 Walmart employees handle a billion transactions annually, the suit says. Sloppy practices also contribute. Some workers share login and password information to money transfer systems, which is prohibited.
But at times, staff are in on the crimes, the lawsuit says.
"In some cases, Walmart has had corrupt or complicit employees at its locations that have facilitated the payments of fraud-induced money transfers," it says. "Records demonstrate that, for many years, employees have, among other things, received cash tips for their assistance in processing fraud-induced money transfers, allowed individuals to use multiple names and/or IDs in picking up money transfers, used the same personally identifiable information for different customers, structured transfers for customers to avoid ID requirements, made up fictitious information for customers.
"In 2017, a MoneyCenter associate, who used another associate’s Operator ID, processed at least 28 money transfers totaling $22,472.50 over a ten-day period when no customer was even present," it continues.
Walmart denies its fraud-fighting system is flawed.
"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 said
The lawsuit is full of serious allegations, most dating between 2014 and 2019. It claims MoneyGram and Western Union have at times suspended individual Walmart locations because of high fraud rates.
"MoneyGram and Western Union have provided information to Walmart about certain locations in the United States and Canada that had fraud rates of more than 25 percent, 50 percent, or even 75 percent of their money transfer activity (based on the number or dollar amount of transactions) when taking into account confirmed fraud and linked or potential fraud," it says.
The suit also claims that many Walmart stores were missing the basics. A 2019 n audit found that 39 percent of the Walmart stores were missing fraud awareness materials and 24 percent of the stores were missing so-called "send forms," which provide a consumer fraud warning on the front page.
Individual stores were notorious havens for criminals, the lawsuit alleges:
Walmart location #3159 in Teterboro, New Jersey paid out at least 150 reported fraud-induced money transfers totaling $272,945.50.
Walmart location #5293 in Valley Stream, New York paid out at least 358 reported fraud-induced money transfers totaling $424,213.81
Walmart location #5129 in Landover Hills, Maryland has paid out at least 368 reported fraud-induced money transfers totaling $233,897.28
Simple fraud screening should have detected much of the fraud, the suit alleges.
"Walmart has continued to process fraud-induced money transfers while turning a blind eye to suspicious characteristics or other indicators that the transfers were induced by fraud. For years, Walmart has frequently processed transactions that had suspicious characteristics, including: (1) high-dollar money transfers; (2) patterned activity, such as multiple transfers involving similar dollar amounts; (3) one-to-many or many-to-one transactional activity; (4) high-frequency money transfers; (5) transactions with data integrity issues (issues relating to ID numbers, addresses, dates of birth, or other information about recipients); (6) same IDs or addresses used by multiple receivers; (7) money transfers picked up using fake out-of-state IDs; (8) flipping; (9) structuring of transactions; (10) back-to-back transfers; (11) substantial transfers to high-risk countries known for fraud; (12) transactions where the sender and receiver do not appear to have a relationship; and (13) transactions with indications of elder financial exploitation due to the senders’ age.
The lawsuit seeks an injunction to force Walmart to implement changes, and restitution for consumers.