PayPal Sanctioned for Allowing Illegal Payments

PayPal Sanctioned for Allowing Illegal Payments

U.S. government ordered PayPal to pay $7.7 million in fines for allowing illegal payments to and from Iran, Cuba and Sudan, thus violating sanctions set against these countries. The money transferred during this period was allegedly used for production of weapons of mass destruction. One of the cases involved Kursad Zafer Cire, who was proclaimed by the US State Department in 2009 as a person linked to illegal programmes involving weapons. PayPal reportedly processed 136 transactions to or from an account registered in his name. There were also payments involving goods and services going to and from Cuba, Sudan and Iran.

In a statement, PayPal revealed that they had “voluntarily” reported to the Treasury's Office of Foreign Assets Control (Ofac) certain payments between 2009 and 2013, explaining that the delays in scanning from that period, allowed some prohibited payments to slip through the cracks.

"Since then, we've taken additional steps to support compliance with Ofac regulations with the introduction of real-time scanning of payments and improved processes," a PayPal representative revealed in an interview with BBC.

Treasury Department stated there were nearly 500 PayPal transactions worth almost $44,000 which directly violated sanctions that ban US companies from doing business with individuals or organizations from Cuba, Sudan and Iran. PayPal did not admit or deny it had violated the sanctions, they agreed to pay the fine, claiming that the real-time scanning of payments has been improved in the meantime.

Reference: BBC

  • I agree. I think that PayPal should be fined a % of all of the transactions that they processed illegally. there is no doubt that they knew what they were doing? as stated earlier....PayPal is a HUGE force in the payment industry with many watchdogs on their payroll. there is no way they didn't know EXACTLY what they were doing . PayPal simply didn't give a crap and decided to do whatever they wanted to. yuck.
  • Finally!PP is not serious!Many problems for us small customers and it allows large customers to do anything illegal. 7.7 is too little!
  • I don't necessarily believe that those money transaction were for the production of weapons of mass destruction but PayPal got caught :) and why not sanction the american companies that made those transaction? Well... Sanctions are sanction, I think Cuba will soon get rid of the US sanctions.
  • WOW , This shocks me that paypal made such a costly mistake. I hope they do not make us ( customers ) of pay pal pay for it by raising the fees that they charge. I figured for every $50 I get that comes from out of the usa I get charged almost $5 for transaction. $7.7 is a hard hit and am sure some where they will make that money back thur the customers. I just hope am wrong. :)
  • hello my paypal account have many years and is used only for purchases in the shops outside of Brazil,I agree with the fine imposed by the USA and would not be a good idea create problems with the government...anyway found it very strange paypal have done it..
  • This news surprised me a lot. I'm not using PayPal, because in Macedonia PayPal is not allowed, just before six months our government allowed it's citizens to use PayPal, but just for shopping online. It's strange for this big, and World famous company to make this kind of "mistake", but in my opinion, no matter which company made some illegal thing they have to pay for their mistakes, but illegal is illegal.
  • This really surprises me, as Paypal is normally a company that seems to play it very safe when it comes to potential breeches of the law. The US trade sanctions are probably one of the worst financial trading laws you can break, both in terms of the punishment and in terms of what was supposedly done with the money that was sent through Paypal. I think it is a very serious thing and the $7.7 million fine sounds like a lot, but Paypal has billions, so it doesn't really sound like enough of a penalty to me.
  • Hmm, trigger down for security fanatics, such as paypal. Well, the reason of this is more profits, but I think they have to pay more than they earned from these illegal jurisdictions, The other case , that the money arriving such from Iran, Cuba and Sudan is about terrorism-money and US government is obssesed with them, so not a big surprise about that sanction. They should beware from now and hot-point-countries will not gonna transfer again for sure!
  • I open account on PayPal but I never use it. For me the best way for online payments is Moneybookers or skrill. I use Skrill for few years and I never had any problem with them. Now I hear that will maybe neteller buy skrill and don't think that is good for us who love skrill because for sure they will change a lot of thing and I don't love changes.
  • So the reason for this fine was that PayPal allowed transactions by residents of countries the US government has imposed economic sanctions against and is not specifically gambling related? I can understand how some could have gotten through if customers misrepresented themselves e.g. using fake ID/address or proxy servers; presumably these loopholes have now been sealed and the company is more thorough in scrutinizing any suspicious activity.

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