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FTC Sues Walmart For Facilitating Money Transfer Fraud

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The Federal Trade Commission or FTC, has sued Walmart for allowing its money transfer services to be used by fraudsters, who fleeced consumers out of hundreds of millions of dollars. The retail giant is alleged to have looked the other way to pocket millions in fees while scammers took advantage of its failure to properly secure the money transfer services offered at Walmart stores.

The FTC has filed the civil penalty complaint in the U.S. District Court for the Northern District of Illinois. The FTC is urging the court to order Walmart to return money to consumers and to impose civil penalties for Walmart's violations.

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 complaint said.

"Consumers have lost hundreds of millions, and the Commission is holding Walmart accountable for letting fraudsters fleece its customers," said Samuel Levine, Director of the FTC's Bureau of Consumer Protection.

In a statement responding to the complaint, Walmart called the lawsuit "factually flawed and legally baseless" and claimed the FTC refused Walmart the due process of hearing directly from the company.

"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," Walmart said.

The retail giant added, "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."

Apart from its retail business, Walmart also offers customers financial services such as money transfers, credit cards and check cashing, by acting as an agent for multiple money transfer services such as MoneyGram, Ria and Western Union. It also offers some services under its own brand, like "Walmart2Walmart" and "Walmart2World."

According to the FTC complaint, tens of millions of money transfers are sent or received at Walmart stores each year, which were processed by Walmart employees, who were not trained until at least May 2017 to deny fraudulent payouts.

The complaint cites a Walmart reference guide for employees that stated, "If you suspect fraud, complete the transaction."

The FTC also claims Walmart did not have an anti-fraud policy or an ineffective, poorly enforced policy until November 2014 and allowed money transfers to be used for telemarketing purchases.

However, Walmart said in a statement that its associates are trained not to process the transaction if they suspect fraud.

Walmart said associates are also prompted to ask specifically whether customers are conducting a money transfer based on outreach from a telemarketer.

If the customer says that he or she is sending money to pay for a telemarketing purchase, Walmart's point of contact services system terminates the transaction, the company said.

The FTC said its investigation of Walmart's money transfer practices showed that Walmart knew about the role money transfer services play in scams and frauds.

The complaint cites numerous instances in which law enforcement investigations found that scammers relied on Walmart money transfers as a primary way to receive payments, including in telemarketing schemes such as IRS impersonation schemes, relative-in-need "grandparent" scams, sweepstakes scams, and others.

The FTC has brought multiple cases against money transfer services in recent years, including against MoneyGram and Western Union, alleging they failed to protect consumers who used their services.

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