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Crime Businesses The Almighty Buck United States

Walmart's Financial Services 'Became a Fraud Magnet', Says ProPublica (propublica.org) 83

Posted by EditorDavid from the what's-in-store dept.
One man living in Virginia oversaw "the laundering of some $7 million in fraudulently obtained gift cards" from Walmart in an international operation which over five years scammed hundreds of victims into sending the numbers over the phone, reports a new ProPublica investigation. (Citing court evidence that emerged after his arrested in 2021). Earlier that year, he complained to an associate that more and more people were competing to resell cards in China, eating into his profits. So many scammers were flocking to Walmart that he and his team regularly encountered them at self-checkout counters.... "We ran into quite a few at the store, and we even started chatting."
It was apparently so common that federal prosecutors started calling it "The Walmart scheme." And while the store is supposed to watch for customers who appear to be acting on a scammer's instructions, "Too often, Walmart has failed." America's largest retailer has long been a facilitator of fraud on a mass scale, a ProPublica investigation has found. For roughly a decade, Walmart has resisted tougher enforcement while breaking promises to regulators and skimping on employee training, according to more than 50 interviews, internal documents supplied by former industry executives, court filings and other public records...More than $1 billion in fraud losses were routed through the company's financial systems between 2013 and 2022, according to filings by the Federal Trade Commission and court cases analyzed by ProPublica. That has helped fuel a boom in financial chicanery. Americans, many of them elderly, were swindled out of $27 billion between 2013 and 2022, according to the FTC...

Walmart has a financial incentive to avoid cracking down. It makes money each time a Walmart gift card is used and earns a fee when another brand of card is bought. And it receives one commission when a person sends a money transfer and a second when the recipient picks it up. The company's financial services business generates hundreds of millions in annual profits. (Its filings do not provide specific figures for gift cards and money transfers.) "They were concerned about the bucks. That's all," Nick Alicea, a former fraud team leader for the U.S. Postal Inspection Service who investigated Walmart for years, told ProPublica. Walmart's deficiencies have repeatedly attracted government scrutiny. In 2017, the attorneys general of New York and Pennsylvania investigated Walmart over concerns that it was "reaping the benefits" of gift card fraud. The investigation concluded a year later with Walmart promising to restrict or eliminate the use of its gift cards to purchase other gift cards...

Instead, the company let the practice continue until 2022 — even after it knew that millions of dollars were being laundered through its stores. The FTC sued Walmart in 2022, alleging it "turned a blind eye" as criminals took advantage of its money transfer service. Walmart, the FTC claimed, pocketed millions in fees while "letting fraudsters fleece its customers." Summarizing the FTC's evidence, a federal judge in the case wrote that "Walmart knew that its services were used by fraudsters" and that the company was repeatedly warned about certain stores where "twenty-five, fifty, or even seventy-five percent of money transfer activity was fraudulent." Separately, a federal grand jury in Pennsylvania is hearing evidence of possible criminal conduct in Walmart's money transfer business, according to corporate filings that did not detail the allegations.
While the FTC says Americans were swindled out of $27 billion between 2013 and 2022, Walmart responded to ProPublica's investigation by pointing out it's refunded $4 million to gift-card fraud victims, and also blocked more than $700 million in suspicious money transfers. "We have a robust anti-fraud program and other controls to help stop scammers and other criminals who may use the financial services we offer to harm our customers." The company's legal filings in the FTC case struck a different tone. Walmart is seeking to dismiss the suit, partly on the grounds that it has "no responsibility to protect against the criminal conduct of third parties." Though fraud is "deeply unfortunate," Walmart argues, such schemes are "reasonably avoidable by consumers."
Other interesting quotes from the article:
  • "Walmart outlets at one point accounted for the top 20 locations for fraud nationally among chains that partnered with MoneyGram, according to internal documents."
  • "In a single week in March 2017, consumers claiming they'd been duped into a money transfer filed 610 complaints about Walmart, according to documents obtained by ProPublica. CVS ranked second, with 47."
  • "Site inspections routinely found that Walmart staff lacked anti-fraud training and that employees failed to ask screening questions..."
  • Walmart resisted MoneyGram's attempts to fight fraud [according to the former fraud team leader for the postal inspector's office in Harrisburg, Pennsylvania, who investigated MoneyGram and Walmart].

This discussion has been archived. No new comments can be posted.

Walmart's Financial Services 'Became a Fraud Magnet', Says ProPublica More

Walmart's Financial Services 'Became a Fraud Magnet', Says ProPublica

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  • Don't forget (Score:5, Interesting)

    by CEC-P ( 10248912 ) on Sunday January 21, 2024 @10:46PM (#64178241)
    They also sell the most popular burner phones and keep acquiring competitors and changing the names as they get a bad reputation (Straight Talk). They also sell multiple prepaid visas like Green Dot, which are heavily involved in scams. They just do not give one single crap about any of it. All they care about is margins.
    • Comment removed based on user account deletion
      • TIL that "anty" is a word only found on user submitted dictionaries for being covered in ants and does get underlined as a spelling mistake in Chrome. Ante is the less obvious spelling of the word you meant. I had to check if anty was also a real word that wouldn't be underlined as a spelling error and it kind of is and isn't.

        • It seems as if you've decided to be anti-anty, in rather the same fashion that many of us knee-jerk to the anti-Walmart position.

          Mira. Walmart is guilty of many instances of questionable policy: paying living wages low enough that employees qualify for assistance, and bullying vendors into razor thin profit margins to keep their goods in the aisle, come to mind.

          On this front though, expecting store policy and employee policing to curb the fraudulent use of these gift cards and burner phones, that have user

        • Comment removed based on user account deletion

    • Re: (Score:1, Interesting)

      by Voyager529 ( 1363959 )

      They also sell the most popular burner phones and keep acquiring competitors and changing the names as they get a bad reputation (Straight Talk). They also sell multiple prepaid visas like Green Dot, which are heavily involved in scams.

      Let me get this straight: People buy inexpensive phones to make private phone calls at Wal-Mart, and those private phone calls commonly involve illegal activity...and it's both the burner phones that are the problem, and Wal-Mart's job to solve it?

      Greendot cards are prepaid credit cards, commonly used to make online purchases by people with low credit, are given as gifts, and are sold at dozens of retailers...and like cash, are sometimes used for fraud, money laundering, and other problematic purposes...but

      • Re:Don't forget (Score:4, Informative)

        by Anonymous Coward on Monday January 22, 2024 @12:22AM (#64178357)

        If you read the actual article, you will see that Walmart's policies were totally out of line with how other companies handle e.g. gift cards. Especially when a 90 year old woman is trying to purchase several thousand dollars worth of Apple gift cards. A simple question from the cashier if they know who they are sending it to, and whether it's a telemarketing scam if the gift card amount is more than a few hundred should be sufficient to cut down on fraud.

      • Ummm yeah it is Walmart's duty to play their role at the front line and have policies and training for staff. It's why they are being accused of skirting regulations here. Let's be real implementing the policies and training wouldn't cost them much directly as part of their existing training program as an added cost but it would hurt them in lost business from their employees stopping the sales from happening and saving victims.

        If someone goes into a gun store talking about wanting to shoot their wife

    • Re: (Score:1)

      by Anonymous Coward

      I see you're trying to trash burner phones. https://en.wikipedia.org/wiki/... [wikipedia.org]
      "In fact, a publicly available policy assessment report from Mexico showed that mandatory SIM registration introduced there in 2009 had failed to help the prevention, investigation and/or prosecution of associated crimes. As a result, policymakers decided to repeal the regulation three years later."

      I dislike all phones but you can't really get away with not having a phone number and SMS so prepaid phones can have very cheap plans

    • The poor and disenfranchised need that kind of service. They don't all have bank accounts and ID cards. Don't throw the baby out with the bathwater.

    • When everyone is looking for gold, it's a good time to be in the pick and shovel business.
      -Mark Twain

    • They also sell the most popular burner phones and keep acquiring competitors and changing the names as they get a bad reputation (Straight Talk).

      You're thinking of America Movil. That was TracFone's parent company and they were the ones buying up competing MVNOs and operating under several different brand names to give the illusion of competition. They have since been acquired by Verizon Wireless. Walmart does have a relationship with TracFone as the exclusive retailer of Straight Talk, and Walmart Family Mobile (which was originally a T-Mobile MVNO co-branded with Walmart).

      The thing is though, any prepaid phone that can be purchased and activate

      • The thing is though, any prepaid phone that can be purchased and activated with cash can be used as a so-called "burner", and Walmart isn't the only retailer selling them.

        Yep...and they're quite nice for signing up for things online, like new Google accounts, where they now require a phone number for confirmation...so, just use a burner phone and give google a slight middle finger.

    • Re: (Score:3)

      by Kisai ( 213879 )

      You expect a for-profit corporation to give a care? As long as it's not losing money on something, it will engage in it until it's regulated or illegal.

      Remember at some point Walmart got into the selling counterfeit goods business.
      https://www.inc.com/jason-aten/walmarts-website-is-selling-fake-products-even-worse-its-advertising-them-on-instagram.html
      https://www.smobserved.com/story/2021/10/31/business/about-half-products-sold-on-walmartcom-are-counterfeits-according-to-us-government-accountability-office/6

      • What part of fraud involves selling gift cards above face value? Gift cards are used as an anonymous means of electronic payment. You can buy a gift card, give somebody the numbers as payment of extortion or for procurement of illegal services, and the recipient will then use the card to purchase whatever physical goods they want to own or can easily resell.

        Most retailers limit the daily purchase of gift cards to some relatively low dollar amount (I believe Target is $200) as there aren't very many legi

    • They also sell the most popular burner phones and keep acquiring competitors and changing the names as they get a bad reputation (Straight Talk). They also sell multiple prepaid visas like Green Dot, which are heavily involved in scams. They just do not give one single crap about any of it. All they care about is margins.

      Do they give far more of a crap, about individual privacy?

      Phones that happen to be sold without an anti-privacy electronic leash shoved up your ass before you leave the store, you like to call "burner phones" for some reason. And since they sell Green Dot cards, the hell are you going to do when you find cash registers still accepting those drug-dealing greenbacks, with customers still using that "evil" printed money that terrorists use?

      Citizens should be more cautious as to what they admonish, especially

    • It seems like one of Walmart's business units main function is to provide services to criminals.
      If I was an accountant or an IT guy for the mob I bet I'd be indicted along with the rest of them.

      There are those that the law binds and there are those that the law protects.

    • Re: (Score:2)

      by mjwx ( 966435 )

      They also sell the most popular burner phones and keep acquiring competitors and changing the names as they get a bad reputation (Straight Talk). They also sell multiple prepaid visas like Green Dot, which are heavily involved in scams. They just do not give one single crap about any of it. All they care about is margins.

      As long as they keep skimming their % off the top of each transaction they won't give a shit. The end user will end up paying for all the fraud anyway via increased service fees and charges often levied at point of transaction so the end user doesn't notice (they make the merchant hide them from you).

      No doubt they're carefully avoiding being called a bank in order to avoid any regulatory oversight, whilst insinuating in advertising that they're a bank.

      Supermarkets over here in the UK have tried to bec

    • Pay as you go, off the shelf burner phones and expensive packs of per-minute loadups was how lots of us got our drugs 25 years ago. Sure, "crime" was the best use of them then, as it is now. That, and infidelity.

  • The definition of big corporations (Score:4, Insightful)

    by jenningsthecat ( 1525947 ) on Sunday January 21, 2024 @10:58PM (#64178259)

    "They were concerned about the bucks. That's all," Nick Alicea, a former fraud team leader for the U.S. Postal Inspection Service who investigated Walmart for years, told ProPublica.

    Is there any major corporation about which that sentiment isn't true? Some of them pretend to be different because they perceive a need - real or imagined - to convince the public that they're not evil. Walmart is simply so big, and has so many oblivious and/or uncaring customers, that they don't bother to pretend that they give a fuck.

    Throughout the corporate sector, antisocial conduct is mandated in the name of maximizing shareholder returns. That's pretty much a working definition of capitalism as it is currently structured.

    • There's simply no large organization regardless of it's political agenda, public or private, that doesn't do what you describe. It's human nature, not "corporate" nature. Power corrupts. Having said that, providing people with what they ask for isn't evil. Misusing it is.
  • Not really, the fraudsters are its customers.

  • Oh it's two of the worst things at once (Score:4, Interesting)

    by jacks smirking reven ( 909048 ) on Monday January 22, 2024 @12:16AM (#64178341)

    The whole "financialization of everything" aspect on top of the whole "scam economy" which really just go hand in hand.

    The guy scamming your grandma over the phone really isn't that different than the Ivy League grad who spearheaded the "Walmart Financial Services" division to get a 12% return.

    • Clearly scamming isnt' the primary purpose of the financial product and that's a massive difference.
      • The primary purpose of gift cards is a scam. They are "the same as cash", except the cash is no longer yours? It's a shell game, with the money mostly stolen by Walmart, sometimes diverted to someone else, but there is no legitimate use.
        • No legitimates uses for gift-cards ?  I use (Christmas / birthday ) gift-cards to buy food;  splurge-a-bit ! Markets in Jacksonville often take any-card. Seems like a legit use to me and less of a threat than VISA. 

          • So you want to go back to the days of company scrip then? Because that's what you're doing.

          • less of a threat than VISA

            Substantiate that statement please.

            My VISA is an actual credit card which affords me protections against fraud, the ability to chargeback and generally shield me from liability. Do I get any of that with a Walmart gift card?

            You also could have just been given good ol' cash money which you can do all of those things with.

      • Are you sure about that?

        Their "robust anti-fraud program" only caught ~2.6% of the fraud ($704m out of $23B) - Seems to me like just enough to claim that they're doing anything at all, but not much more than that.

        I think they probably knew what was going on, but maintained plausible deniability while laying in the cut and profiting off it. This is billions of dollars we're talking about - I'm not writing off the power of greed so easily.

  • Philosophical definition of fraud (Score:5, Insightful)

    by Wrath0fb0b ( 302444 ) on Monday January 22, 2024 @12:18AM (#64178343)

    Kinda food for thought:

    Alice has convinced Bob that he has to send $X( maybe his money, maybe the company account) to Charlie. Bob goes to {financial service provider} and authorizes a transfer of $X to Charlie's account. The bank verifies that it's really Bob and has him verify the recipient. This is not a case of misrepresented sender (Alice logging into Bob's account) or mistaken recipient (Bob thinks he's sending it to his son Charlie but really it's Charlie's roommate David) or mistaken amount -- Bob has truly authentically said he wants to send that money to Charlie.

    Later on, it turns out Alice convinced Bob to do so via fraudulent means. But what obligation does the financial service provider really have in this regards? They effected the transaction based on the authentic direction of their customer. How many "are you sure" or "this cannot be undone" dialogs are they supposed to add? Would it help if the dialog box said "this looks extremely dumb to us, are you actually sure bro"?

    I can think of a view things they ought to do here, but philosophically I just don't know if I accept the framing that they are involved in, or facilitating, that fraud. They are doing what their customer told them, just the same as anyone else.

    • Re:Philosophical definition of fraud (Score:5, Interesting)

      by jacks smirking reven ( 909048 ) on Monday January 22, 2024 @12:55AM (#64178377)

      How many "are you sure" or "this cannot be undone" dialogs are they supposed to add?

      Reading through the article in the case of Walmart here seems like the answer is "I dunno, at least something?" and it does mention there are some defined legal answers to that idea.

      They really do paint Walmart as an outlier here amongst other chains and that they were aware of this.

      Not a lawyer so facilitating fraud legally? Maybe? Morally and ethically for sure they did.

    • What obligation do I have not to kill and rob you? What obligation does anyone have to care or investigate if you get killed and robbed? We live in a society, society has agreed to some rules, one of those rules is that when you see some blindingly obvious signs that you are about to participate in (and profit from) defrauding someone of a whole lot of money, you remind them that scammers use gift cards and lie and stuff. It's not just basic human decency, it's the law.

      • Walmart is full of those anti-scam reminders.
        When someone vulnerable has already gotten to the point of going to the store to buy the cards, what more can be done to protect them?
        I see no easy answers here.

        • How is it not easy to take 5 seconds out of your day to ask someone making an unusually large purchase of gift cards, "Did someone tell you to buy these?" Would you really rather participate in fraud for your company's profit?

      • Comment removed based on user account deletion

    • Re: (Score:3)

      by mjwx ( 966435 )

      Kinda food for thought:

      Alice has convinced Bob that he has to send $X( maybe his money, maybe the company account) to Charlie. Bob goes to {financial service provider} and authorizes a transfer of $X to Charlie's account. The bank verifies that it's really Bob and has him verify the recipient. This is not a case of misrepresented sender (Alice logging into Bob's account) or mistaken recipient (Bob thinks he's sending it to his son Charlie but really it's Charlie's roommate David) or mistaken amount -- Bob has truly authentically said he wants to send that money to Charlie.

      Later on, it turns out Alice convinced Bob to do so via fraudulent means. But what obligation does the financial service provider really have in this regards? They effected the transaction based on the authentic direction of their customer. How many "are you sure" or "this cannot be undone" dialogs are they supposed to add? Would it help if the dialog box said "this looks extremely dumb to us, are you actually sure bro"?

      I can think of a view things they ought to do here, but philosophically I just don't know if I accept the framing that they are involved in, or facilitating, that fraud. They are doing what their customer told them, just the same as anyone else.

      Shouldn't that be Malory posing as Alice... But I digress. I think a large part of the problem is that the US doesn't have a system of interbank transfers available to the end user, especially one that is free. Almost every other developed economy has one and most of the developing nations as well. To send money to someone in Australia or the UK I just need to know their bank number (BSB/Sort code), Account Number and name. The transfer is free and usually instant. The US has had to develop a lot of differ

    • 'How many "are you sure" or "this cannot be undone" dialogs are they supposed to add? Would it help if the dialog box said "this looks extremely dumb to us, are you actually sure bro"?'

      Moneygram requires more than zero. Walmart chose zero. Walmart also created a parallel money transfer system to use if Moneygram itself rejected a transfer as fraudulent.

      Also, Walmart agreed to not allow buying gift cars with gift cards but kept doing so. Walmart agreed to not load more than $500 on a gift card, but continued

    • Would it help if the dialog box said "this looks extremely dumb to us, are you actually sure bro"?

      You have very obviously never worked in tech support, else you'd know that people don't read text boxes before they close them.

    • But what obligation does the financial service provider really have in this regards?

      Did you miss the part in the article where often times the customer refunded the money? It is in the interest of all the financial service providers for transaction not to be fraud. However Walmart is basically betting that they are not required to refund the money most of the time. They can do it in a number of ways like requiring unreasonable amounts of proof to denying all responsibility when proof is provided.

      They effected the transaction based on the authentic direction of their customer. How many "are you sure" or "this cannot be undone" dialogs are they supposed to add? Would it help if the dialog box said "this looks extremely dumb to us, are you actually sure bro"?

      Except the problem that the summary points out: the financial service provider knows that a his

    • That's why most of these services have relatively low daily limits. That's the easiest protection to put in place. For higher-dollar transactions, they can still be done and there is all of the fraud potential you mentioned, by using actual bank transfers but those aren't anonymous and Charlie (or David) can be tracked down and money recovered.

  • Gift cards are too poorly regulated. A relative of mine was swindled a lot of money via a Target gift card scam.

  • Financial services with little to no oversight become a magnet for fraud, money laundering and other criminal activities?

    Someone please hand me some pearls I could clutch!

  • "Have you scanned your club card?"
    - No
    (ring up items)
    -Checkout
    "Have you scanned your club card?"
    - NO
    "Do you want to donate $2 to a charity?"
    - No
    "Do you want to put it on payments with our credit card?
    - No
    "Do you want to buy an extended warranty for item #2"?
    - No
    "Debit/credit, cash..."
    - Credit card
    "Do you want a printed receipt, an email, or none?"
    - Printed

    I just want to buy some fucking cilantro. Good Christ.

  • You've got to ac-cent-tchu-ate the positive
    Ex-ten-u-ate [dictionary.com] the negative
    Pro-tect the top executives
    Ig-nore that Government weenie


    With apologies to Johnny Mercer
    https://en.wikipedia.org/wiki/... [wikipedia.org]
  • Something must be done about the rampant crime being funded by legal US cash.

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