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Walmart pushes for exemption from state anti-fraud database

Walmart Neighborhood Market
A Walmart Neighborhood Market

Florida's check-cashing industry has been notorious for allowing criminals to commit money laundering, workers-compensation fraud and tax refund schemes.

So when state lawmakers in 2013 passed a law requiring licensed check-cashers to report, in real time, the people and checks passing through their doors, law enforcement called it a big step in the right direction. Florida is believed to be the only state with a database like it.

But the nation's largest retailer is displeased.

For the last year, Walmart has been pushing to be able to cash bigger checks without participating in the database, arguing that its own anti-fraud programs are a "highly effective" substitute.

The company asked for a temporary waiver last year so it could cash bigger FEMA assistance checks in the wake of Hurricane Irma. And in this year's legislative session, it pushed for a bill that would have effectively gutted the state's database, rendering it nearly useless.

Walmart believes that Florida's unique restrictions are too onerous, and it wants to change them so it can serve more customers.

"For us, this issue is not about fraud, it’s about serving our customer’s needs," Walmart spokeswoman Monesia Brown said in a statement. "We think the current limit in Florida is outdated and our customers agree."

The issue received little attention during session. Walmart's bill quickly died after the state's Office of Financial Regulation, which manages the database, came out strongly against it.

But it received attention last week, after Politico reported that Walmart went above OFR's head in the middle of the Legislative session, appealing to state CFO Jimmy Patronis on the bill. Last week, the head of OFR announced he was resigning, under pressure from Patronis.

State Sen. Jeff Brandes, R-St. Petersburg, who sponsored the bill, said that with the current head of OFR leaving, Walmart could be effective avoiding the state regulators.

"I think the new head of OFR, having a different perspective, could pave a new path forward," Brandes said.

The state's financial regulators had serious concerns about this year's bill, however.

Businesses that specialize in cashing checks have to be licensed by the state, record the IDs and thumbprints of customers cashing checks larger than $1,000, and send the information into the database.

But large companies that don't specialize in check-cashing, like Walmart, are allowed to cash checks of up to $2,000 per person per day without recording any information about the customer. Information about the checks and who cashes them also does not go into the state's database.

It's a loophole that Walmart wants to expand, so that it can cash up to $7,500 in checks per person per day without the state's safeguards.

State regulators fear that would be disastrous. Since 94 percent of all checks in the state's database are less than $7,500, the vast majority of criminals could simply go to to Walmart to cash their checks without scrutiny.

"The amount of data and the usefulness of the CCDB [check-cashing database] would be substantially reduced, and its fraud-detection abilities would be virtually eliminated," one OFR document states. "The potential impacts of Senate Bill 1126 are cause for great concern."

For decades, law enforcement and businesspeople fought to get the state to crack down on the industry. Two statewide grand juries and a state task force all recommended greater scrutiny of check-cashing stores, which they called in 2008 a "shadow banking industry" responsible for laundering hundreds of millions of dollars each year in the state.

The new database, rolled out in 2015, allows state regulators to see in real time who is cashing checks and where. Before, regulators had to rely on the store's own electronic logs, and they weren't able to track criminals who jumped from store to store to pass fraudulent checks.

The database is used by the IRS' Miami and Tampa offices and by police around the state, and officials chalk up some arrests to the new system.

But Walmart believes its own security justifies increasing the limit to $7,500.

"While we understand the intent of the state’s limit - the risk of fraudulent checks - we believe our advanced in-store technologies, expert investigators and asset protection associates are highly effective in deterring, identifying and researching fraudulent activity," Brown, the company spokeswoman said.

The company's lobbyist, Jeff Johnston, said that Walmart wants to serve a population that doesn't have bank accounts, and that it did not want to hamper the state's anti-fraud efforts.

"We never had any intentions to hurt the database, blow up the database," Johnston said. "From what we’ve been told, it’s doing very, very good things."

He said the Walmart is not opposed to sharing some data with state regulators, but it has no interest in becoming a licensed check-casher.

"There are no other states that have a database or would require us to do what Florida has asked," Johnston said. "We’re not designed that way."

For Brandes and the House sponsor of the bill, Rep. Lawrence McClure, R-Dover, the issue is whether the restrictions hamper businesses from operating in the state.

"We don’t want to do something that isn’t in the best interests of Florida’s business climate," McClure said.