According to the FTC’s complaint, filed on June 28 in the U.S. District Court for the Northern District of Illinois, Walmart failed to properly secure money-transfer services offered at its stores; failed to properly train its employees; failed to warn customers; and used procedures that allowed fraudsters to cash out at its stores, according to the FTC’s complaint. The FTC is asking the court to require Walmart to return money to consumers and impose civil penalties.
From 2013 to 2018, more than $197 million in payments that resulted from fraud scams were sent or received at Walmart, “with more than $1.3 billion in related payments also possibly connected to the fraud,” the FTC stated, citing fraud databases maintained by MoneyGram, Western Union, and Ria.
According to the FTC’s complaint, “Walmart knew about the role money transfer services play in scams and frauds.” Still, according to the FTC, Walmart engaged in the following practices:
Allowed the payout of suspicious transfers: For years, Walmart had an employee policy that explicitly stated, “ ‘If you suspect fraud, complete the transaction.’ Walmart did not begin training employees to deny fraudulent payouts until at least May 2017,” the FTC stated. Even then, it provided such training only at a limited number of locations.
No anti-fraud policy or an ineffective and poorly enforced policy: According to the FTC’s complaint, Walmart did not have a written anti-fraud or consumer protection program until November 2014. Even after that time, Walmart violated its own policies and those of its partners, like MoneyGram.
Failed to effectively train or retrain staff: In many cases, Walmart employees who were authorized to handle money transfers as “backups” received either no or limited anti-fraud training. In some instances, Walmart employees were complacent or complicit in scams, accepting cash tips from scammers in exchange for processing fraudulent payments or being directly involved in the scams themselves, according to the FTC.
Allowed for pickups of large cash payments: The FTC complaint further alleges Walmart allowed not only the pickup of large cash payments, but also allows scammers to retrieve their payments from Walmart with fake IDs.
Failed to provide materials to prevent consumers from sending fraudulent payments: According to the complaint, Walmart failed to display or provide required materials warning consumers about these potential scammers.
Allowed money transfers to be used for telemarketing purchases: The FTC’s Telemarketing Sales Rule has since 2016 prohibited money transfers from being used to pay for telemarketing purchases because of the high risk of fraud. But the complaint alleges that, for years, Walmart failed to take steps to comply with that provision.
The Commission voted 3-2 to file the civil penalty complaint, with Commissioners Noah Joshua Phillips and Christine Wilson dissenting.
Walmart Fighting Back
Walmart has called the FTC complaint “factually misguided and legally flawed,” in a company statement.
“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 stated. “In fact, Walmart has stopped hundreds of thousands of suspicious transactions totaling hundreds of millions of dollars.”
“Despite Walmart’s anti-fraud programs, the FTC is trying to blame the company for actions by third parties, including fraud the FTC has already acknowledged was caused by another company—while that company was under federal government oversight through a compliance monitor, and during a period when that company’s own fraud prevention system had failed,” the company continued.
Walmart further noted the Department of Justice refused to take the case to court. “Despite the fact that the Justice Department took a pass on this lawsuit and two of the FTC’s own Commissioners voted against it, the FTC has unfortunately chosen to pursue a misguided lawsuit that distorts existing law by attempting to hold Walmart strictly liable for the wrongdoing of third-party criminals, despite all our efforts to stop fraudsters.”
Walmart said it will “defend against this lawsuit aggressively.” 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.