Cybersecurity Lapse: Walmart to Pay $10 Million for Failing to Secure Money Transfer Services, and Preventing Unusual Financial Transactions

• An FTC lawsuit has resulted in a settlement of $10 million to be paid by Walmart
• Scammers used their wire transfer services for five years to launder over $197,316,611
• The complaints highlighted Walmart’s inadequate employee training and anti-fraud policies

A Federal Trade Commission (FTC) lawsuit against Walmart has reached a settlement of $10 million to be paid for the company’s failure to implement adequate anti-fraud measures. Scammers used Walmart’s wire transfer services to defraud consumers from 2013 to 2018. 

Following this, the FTC filed a lawsuit alleging that the multinational retail corporation's negligence contributed to consumers losing at least $197,316,611 (including fees) and potentially $1.3 billion in related transactions.

The FTC has reasons to believe that the actual amount is much larger.

The initial FTC complaint filed on June 28, 2022, cited that over 226,679 complaints about fraudulent money transfers were sent or received at Walmart. These complaints were received and maintained by money transferring service providers, MoneyGram, Ria, and Western Union.

“Electronic money transfers are one of the most common ways that scammers tell consumers to send them money, because once it’s sent, it’s gone for good,” Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection, stated in a press release.

The court also ordered Walmart to secure its systems to prevent fraud in the future. Reiterating the importance of employee training, Mufarrige further added, “Companies that provide these services must train their employees to comply with the law and work to protect consumers.”

The following areas of negligence were observed on the part of Walmart in the fraudulent transactions duping users:

• Inadequate employee training
• Failure in implementing anti-fraud policies and procedures
• Failure in warning customers about potential financial fraud 
• Allowing large cash payments paired with lax ID verification
• Non-compliance with the Telemarketing Sales Rule 
• Failing to monitor or identify unusual transactions

The stipulated order made the following judgment prohibiting Walmart from:

• Offering financial transaction services without effectively detecting and preventing fraudulent transfers
• Knowingly allowing money transfers of a fraudulent nature
• Deliberately ignoring any telemarketer who accepts cash-to-cash transactions for goods, services, or charitable contributions through telemarketing
• Allowing telemarketers who contact consumers to pay in advance for loans or credit extensions