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PayPal To Pay $7.7 Million For Sanctions Violations

Posted by samzenpus on from the pay-up dept.

jfruh writes PayPal may not be a bank, but it's still legally required to follow regulations on transferring money — but the company has admitted to a number of violations, including allowing transfers to an individual specifically sanctioned by the U.S. State Department for helping proliferate nuclear weapons. From Ars: "On Wednesday afternoon, PayPal reached a settlement with the US Treasury Department, agreeing that it would pay $7.7 million for allegedly processing payments to people in countries under sanction as well as to a man the US has listed as involved in the nuclear weapons black market. The company neither confirmed nor denied the allegations, but it voluntarily handed over its transaction data to the US Department of Treasury’s Office of Foreign Assets Control (OFAC)."

68 comments

  1. Using PayPal to pay for a nuke... by PaulBu · · Score: 1

    Priceless! :)

    1. Re:Using PayPal to pay for a nuke... by The+New+Guy+2.0 · · Score: 1

      That's MasterCard's trademark, this is about PayPal.

    2. Re:Using PayPal to pay for a nuke... by rtb61 · · Score: 3, Insightful

      So paypay needs to do exactly what mastercard does when it comes to paying bribes and laundering money. Issue business debit cards that are not in the persons name. They give the bribe recipient the card and the bribe recipient can spend the money available, with all expenditures going against the laundering companies income tax and all purchase by the bribe recipient are hidden. So basically they give birth to fake people, as corporations and the corporate pretend person spends the money not the real individual who is actually the corporation. Why do you think they bother with all that paperwork, lie, cheat and steal, it is simply how they deal.

      --
      Chaos - everything, everywhere, everywhen
    3. Re:Using PayPal to pay for a nuke... by ralphsiegler · · Score: 1

      https://www.paypal.com/webapps... You can have the best of both worlds. "One M-54 with 20 ton yield please, and Charge It!"

  2. It was me. by Anonymous Coward · · Score: 1

    I support the right of all individuals to arm themselves as they see fit.

    Can you really tryst your government? Of course not, that's why you need the capacity to cause devastating harm in order to make them listen.

    1. Re:It was me. by Darinbob · · Score: 1

      Tryst is the wrong word. That implies a brief romantic encounter. Whereas the government screws you for many many years.

    2. Re:It was me. by Anonymous Coward · · Score: 0

      Obviously the government planted the typo for some nefarious and sinister reason.

      Like they did with aglets.

    3. Re:It was me. by parkinglot777 · · Score: 1

      I support the right of all individuals to arm themselves as they see fit.

      Arm themselves with nuclear weapons???

    4. Re:It was me. by Anonymous Coward · · Score: 0

      Arm themselves with nuclear weapons???

      It's in the constitution.

  3. Typical by Xac · · Score: -1

    Elon Musk just cannot run a successful business.

    1. Re:Typical by Grishnakh · · Score: 1

      Elon hasn't been involved with PayPal for ages. He took his money and moved on to more interesting projects.

      This is like blaming Woz for anything you don't like about Apple today.

    2. Re:Typical by Xac · · Score: 0

      More interesting, but ultimately doomed to fail. He should have stuck with pure stealing people's money, instead of subtly doing so.

  4. charge back for a nuclear bomb? by alen · · Score: 1

    item not as described

    i can see how that would go

    1. Re:charge back for a nuclear bomb? by SeaFox · · Score: 1

      item not as described

      Apparently what they got was just a shoddy bomb casing full of used pinball machine parts.

  5. Luxembourg? by Skinkie · · Score: 1

    Why would a Luxembourg based company be fined by US sanctions?

    --
    Support Eachother, Copy Dutch Property!
    1. Re:Luxembourg? by sjames · · Score: 1

      Because it does business in America and wishes to continue doing so.

    2. Re:Luxembourg? by Anonymous Coward · · Score: 0

      Corporate Headquarters: California
      Worldwide Operations: Nebraska
      EU Headquarters: Luxembourg
      Intl. Headquarters: Singapore

      Being based in the US means you need to follow US sanctions...

  6. I hate PayPal by Anonymous Coward · · Score: -1

    PayPal is an abomination. My account was automatically frozen by PayPal because I changed my credit card billing address before I could even make my first eBay purchase. Many phone calls later to "support" and repeated faxing (scans and email not allowed! I don't even own a fax machine anymore) of identification documents and my account was still frozen.

    I gave up and will NEVER EVER USE PAYPAL. I live for the day when the near-monopoly of that evil company is destroyed.

    http://www.paypalsucks.com/

    1. Re:I hate PayPal by BradMajors · · Score: 1

      Are you Kursad Zafer Cire?

    2. Re:I hate PayPal by tompaulco · · Score: 1

      I will not use a service that enjoys all of the benefits of being a bank without having to abide by the regulations of being a bank. Obviously this article indicates that they are being held to SOME of the regulations of being a bank, but clearly they are not being held to all of them. A bank cannot just decide to freeze your account except under specific and documented circumstances.

      --
      If you are not allowed to question your government then the government has answered your question.
  7. All your base... by roman_mir · · Score: -1, Offtopic

    America...
    America...

    America, FUCK YEAH!

    Coming again, to save the mother fucking day yeah,
    America, FUCK YEAH!

    Freedom is the only way yeah,
    Terrorists your game is through cause now you have to answer too,
    America, FUCK YEAH!

    So lick my butt, and suck on my balls,
    America, FUCK YEAH!
    What you going to do when we come for you now,
    itâ(TM)s the dream that we all share; itâ(TM)s the hope for tomorrow

    FUCK YEAH!

    McDonalds, FUCK YEAH!
    Wal-Mart, FUCK YEAH!
    The Gap, FUCK YEAH!
    Baseball, FUCK YEAH!
    NFL, FUCK YEAH!
    Rock and roll, FUCK YEAH!
    The Internet, FUCK YEAH!
    Slavery, FUCK YEAH!

    FUCK YEAH!

    Starbucks, FUCK YEAH!
    Disney world, FUCK YEAH!
    Porno, FUCK YEAH!
    Valium, FUCK YEAH!
    Reeboks, FUCK YEAH!
    Fake Tits, FUCK YEAH!
    Sushi, FUCK YEAH!
    Taco Bell, FUCK YEAH!
    Rodeos, FUCK YEAH!
    Bed Bath And Beyond (fuck yeah?, fuck yeah)

    Liberty, FUCK YEAH!
    White Slips, FUCK YEAH!
    The Alamo, FUCK YEAH!
    Band-aids, FUCK YEAH!
    Las Vegas, FUCK YEAH!
    Christmas, FUCK YEAH!
    Immigrants, FUCK YEAH!
    Popeye, FUCK YEAH!
    Democrats, FUCK YEAH!
    Republicans (.....fuck yeah, ....fuck yeah)
    Sportsmanship, (....)
    Books, (......)

    --
    You can't handle the truth.
    1. Re: All your base... by Anonymous Coward · · Score: 0

      Ignorant

  8. Paypal better pick what it wants to be... by The+New+Guy+2.0 · · Score: 2

    PayPal doesn't seem to like to comply with laws. They don't want to be declared a "bank" yet they still act like one, and they don't respect trade sanction laws. eBay also runs into trouble before complying with a law. These companies need some repair work done.

    1. Re:Paypal better pick what it wants to be... by Grishnakh · · Score: 2

      It's too bad no one else seems to be able to make a decent competitor to them. Citibank tried a while ago and threw in the towel, even Google tried and gave up too. It's a simple concept: make a payment-processing service which nearly anyone can sign up for, which can allow you to accept credit-card payments from others (without having to get a $$$ merchant account), which lets people send money to each other easily without gigantic wire-transfer fees, and which lets people transfer money in and out of it. Why aren't the big banks doing this? I guess because they can't tack on all kinds of horrendous fees and still get people to use it, and PayPal's business model isn't profitable enough for them.

    2. Re:Paypal better pick what it wants to be... by Rujiel · · Score: 1

      Our banks don't comply with laws, either--or was that you point in mentioning how paypal acts like a bank? At least paypal can't fuck up when processing your morgage, and then illegally forclose on you as a result.. (not defending paypal)

    3. Re:Paypal better pick what it wants to be... by The+New+Guy+2.0 · · Score: 1

      C2it wasn't from CitiBank... it was a scam that stole the logo.

    4. Re:Paypal better pick what it wants to be... by tompaulco · · Score: 2

      Why aren't the big banks doing this? I guess because they can't tack on all kinds of horrendous fees and still get people to use it, and PayPal's business model isn't profitable enough for them.

      I have a different guess. My guess is that big banks are banks and have to obey the banking regulations and so they can't afford to compete with companies like Paypal which doesn't have to obey the banking regulations even though they act as a bank.

      --
      If you are not allowed to question your government then the government has answered your question.
    5. Re:Paypal better pick what it wants to be... by Wootery · · Score: 1

      They can randomly freeze your account and prevent you getting access to 600,000 Euros of your money, though, if you make the mistake of trusting them with large sums.

    6. Re:Paypal better pick what it wants to be... by mjr167 · · Score: 1

      My bank lets me send money to anyone I want... You give me your account and routing number (which are printed on your checks) and I fill out a form on my bank's website to tell them to send you the money. Your bank account number isn't a secret. And no, my bank doesn't charge me fees for this service. If yours does, you have a shitty bank.

    7. Re:Paypal better pick what it wants to be... by RabidReindeer · · Score: 1

      My bank lets me send money to anyone I want... You give me your account and routing number (which are printed on your checks) and I fill out a form on my bank's website to tell them to send you the money.

      No it doesn't.

      The US Government has a list of "entities" that all employees, transactions, vendors, etc., etc., etc. have to be vetted against. These "entities" are people, corporations, the names of ocean-going vessels and so forth.

      If the name of one of these entities comes, up, the Feds have to be notified.

      Ironically, "Osama bin Ladin" was never on the list - they spelled it Fox News style ("Usama"). But God Help You if your name is Guadalupe Ortiz. Every so often someone with that name shows up on the news for having been outed by the Government's list after trying to buy a car or something.

      And the sad thing about it is that the actual offending "Guadalupe Ortiz" wasn't a person, it was a travel agency that had been laundering money.

    8. Re:Paypal better pick what it wants to be... by Grishnakh · · Score: 1

      That really doesn't explain anything and just sounds like conspiracy theory talk. How exactly does PayPal not technically being a bank give them such an advantage? Finally, why is it such a problem for PayPal to not be a bank, but for places like authorize.net and other credit-card processors it's OK? Also, I do believe Amazon Payments is doing something pretty similar to PayPal, and I never hear anyone complain that they're not a bank, nor did I ever hear anyone complain about Google Payments (which still exists BTW, but it's only used for buying stuff on the Google Play store now).

      What banking regulations, exactly, are making it unprofitable for real banks? And what good are these regulations anyway? Why do we need these regulations? They sure didn't help prevent the whole 2008 financial disaster. In fact, after that disaster, the big banks all got free no-strings bailouts from the government. PayPal never got a bailout. So why are you acting like PayPal is somehow unethical and the banks aren't, when the banks are outright criminal?

    9. Re:Paypal better pick what it wants to be... by Rujiel · · Score: 1

      You're right that paypal is not a moral actor. Their freezing of wikileaks' donations account over pressure from the government was bullshit.

    10. Re:Paypal better pick what it wants to be... by ralphsiegler · · Score: 1

      Why? They can just pay this miniscule fine and other similar nuisance expenses and move on. They're making money. No problem from their point of view. It's like the liquor stores across the street from the university I attended; the city law said no such stores allowed within X distance from a college or the fine Y would be paid for every Z weeks of operation. So these stores would cut city annual check of 52 / Z * Y every year, problem solved.

    11. Re:Paypal better pick what it wants to be... by The+New+Guy+2.0 · · Score: 1

      Running into this fines repeatedly could cause PayPal to be redefined as a bank under law. States could code a list of banks and put PayPal on it.

  9. Not a bank? by plopez · · Score: 4, Insightful

    1) They take deposits
    2) They make payments
    3) They charge fees
    4) They make loans

    How exactly do they differ from a bank? If it walks like a duck and talks like a duck.....

    --
    putting the 'B' in LGBTQ+
    1. Re:Not a bank? by Kenja · · Score: 4, Insightful

      They are "not a bank" in the same way Uber is "not a taxi service". It's all down to avoiding regulations.

      --

      "Have you ever thought about just turning off the TV, sitting down with your kids, and hitting them?"
    2. Re:Not a bank? by phantomfive · · Score: 1

      What is their reserve ration? If it is high, that would be the biggest difference between them and a bank (the difference being they are unlikely to default if the reserve ratio is high).

      --
      "First they came for the slanderers and i said nothing."
    3. Re:Not a bank? by Anonymous Coward · · Score: 0

      Yeah, but you wouldn't download a car...would you?

    4. Re:Not a bank? by jader3rd · · Score: 2

      How exactly do they differ from a bank? If it walks like a duck and talks like a duck.....

      It's different because everything they do is appended with "... but on a computer".

    5. Re:Not a bank? by jader3rd · · Score: 1

      Yeah, but you wouldn't download a car...would you?

      With the proper 3D printer, why wouldn't I?

    6. Re:Not a bank? by Wootery · · Score: 4, Informative

      They don't engage in fractional-reserve banking.

      Whether PayPal are legally a bank, depends on the country. iirc they are a bank in Australia.

    7. Re:Not a bank? by elmer+at+web-axis · · Score: 1
      Wikipedia

      A bank is a financial intermediary and money creator that creates money by lending money to a borrower, thereby creating a corresponding deposit on the bank's balance sheet.

      Paypal is definitely a financial intermediary but they aren't a money creator. Thus they aren't a Bank.

  10. Honest observation, questions by Anonymous Coward · · Score: -1

    We havent had a story on Systemd in a while. Is Slashdot downplaying the controversy in a secret bid to boost its adoption rates? What its stake tho?

  11. OFAC knowledge here by turp182 · · Score: 2

    I'm not sure if this is good or not, but it does represent a valid usage of OFAC (Office of Foreign Asset Control) regulations.

    I've designed international life insurance admin systems that involved OFAC checks. Resolution requires manual verification.

    OFAC provides a list of people that you cannot do business with if you are a US company (possibly if you have a US presence, I'm not sure though, I worked for a US company). It is basically a list of terrorists or otherwise sanctioned individuals that the US blocks financial transaction with.(Osama is still there as far as I know, he was our test case).

    I've always considered OFAC to be a Federally mandated job program. Same for Sarbanes-Oxley (worked with that a lot as well). Just extra regulation requiring more bodies at every financial company.

    I coined the never heard phrase "OFAC is to preventing terrorism as Sarbanes-Oxley is to preventing fraud" (I have an actuarial and IT background, so it's funny to me).

    But in this case, initial appearances would suggest that the fine is justified. If the person on the OFAC list is justifiably on the list.

    And that justification is my problem with the system. The rules are pretty secret, anyone could end up on the list and not be able to fight it. It's like the no-fly list which even impacted a Kennedy:
    http://www.washingtonpost.com/...

    Interesting for sure.

       

    --
    BlameBillCosby.com
    1. Re:OFAC knowledge here by turp182 · · Score: 1

      Here are the OFAC lists:
      http://www.treasury.gov/resour...

      --
      BlameBillCosby.com
    2. Re:OFAC knowledge here by rowls · · Score: 1

      The OFAC restrictions apply to non US companies and individuals as well. Any payment sent through a US bank will be checked against an OFAC list, this will probably include most payments in USD between non-US banks. When a payment triggers an OFAC hit, the funds are seized and impounded by the US Bank and turned over to the Feds. Folks outside the US really hate this.

    3. Re:OFAC knowledge here by turp182 · · Score: 1

      Thanks for the info. I understand and can appreciate the implications of the OFAC lists (basically a simple form of economic warfare against specific individuals and parties, preventing them from using certain global financial companies).

      But, OFAC checks are supposed to be performed before any funds are transferred (prior to contract entry in my experience). So they generally can't be seized or impounded by the US financial system, because letting them in at all is illegal (I'm sure they are at least frozen if a company, such as Paypal, performs transactions for a restricted party).

      --
      BlameBillCosby.com
    4. Re:OFAC knowledge here by rowls · · Score: 1

      If the customer of a US bank sends a payment instruction to their bank (most likely for a wire only as most US banks don't OFAC scan ACH payments) and the payment includes text that triggers an OFAC hit, the bank will debit their account and seize the funds. That is what they are required by law to do.

      If a bank outside the United State sends a payment instruction to their USD correspondent (a US bank), the US bank will scan the instruction for an OFAC hit. If a a hit occurs, the US bank will debit the account of the non-US bank and seize the funds. The non-US bank has probably already debited the account of their non-US customer, and won't give the money back.

      Non-US may or may not scan payments against the US OFAC list. There is not guarantee that they will, and if your money ends up in a US bank where it triggers an OFAC hit, you are unlikely to get it back easily.

    5. Re:OFAC knowledge here by Anonymous Coward · · Score: 0

      I for one, am grateful for OFAC...how else would we stop health insurance companies from reimbursing Americans for their legally acquired emergency medical care?

      http://www.exportlawblog.com/archives/6524

    6. Re:OFAC knowledge here by Anonymous Coward · · Score: 0

      Terrorists, hit-men, traffickers - and the occasional travel agent.

    7. Re:OFAC knowledge here by RabidReindeer · · Score: 1

      At one time, at least, the OFAC list included the entire democratically-elected government of Palestine. By name.

      Not because they were all confirmed terrorists. Because they were all democratically elected heads of a "terrorist state".

  12. Democracy in action by Dunbal · · Score: 5, Insightful

    That's the nice thing about lists. The government says you're on it, and that's that. No proof required. No means to defend yourself or prove your innocence. Nope, you're on the list, and now we're going to bully everyone and cut you out of all the conveniences of modern life. Those who don't co-operate, well, you wouldn't want to be "aiding a terrorist" now would you?

    The "free" world has gone insane, and I despair when I see a whole new generation growing up that doesn't seem to have a problem at all with this modus operandi.

    --
    Seven puppies were harmed during the making of this post.
    1. Re:Democracy in action by mars-nl · · Score: 1

      This is why we should avoid (near)monopolies such as Paypal (and Mastercard, Visa, Apple, Facebook, Google....). We should decentralize, for example by using Bitcoin.

    2. Re:Democracy in action by Anonymous Coward · · Score: 0

      paypal's defense is simple... if this guy is so bad, why didn't you lock him up?

      but i'm sure all you idiots are more concerned with women not being given enough chance to advance in terrorist valley.

    3. Re:Democracy in action by Anonymous Coward · · Score: 0

      because he's a Turkish national, you shit-for-brains. the US doesn't automatically have arrest powers in fucking Turkey.

    4. Re:Democracy in action by Anonymous Coward · · Score: 0

      because he's a Turkish national, you shit-for-brains. the US doesn't automatically have arrest powers in fucking Turkey.

      Agree in this instance, but I've always been puzzlied about why the US BIS list includes numerous parties in the US.

      The US can't do something about this guy?
      "AL KAYALI CORPORATION" "605 TRAIL LAKE DRIVE" "RICHARDSON" "TX" "US" "75081" "06/19/2003" "06/29/2056" "Y" "2007-01-31" "DENIED UNTIL 2056" "68 F.R. 38290 6/27/03 72 F.R. 4236 1/30/07"

      Cite:
      https://www.bis.doc.gov/dpl/dpl.txt

  13. Now I wonder if... by ctrl-alt-canc · · Score: 1

    ...they will pay the sanction using PayPal.

  14. How do I restore Javascript based posting? by turp182 · · Score: 1

    This is way off topic, but I have reset things and tried others. Slashdot can be difficult to navigate at times.

    I attempted to but I can't figure it out, and I'm sick and tired of the pure HTML posting and moderating interface (it sucks wiffle balls).

    I have enabled Slashdot.org in NoScript.

    --
    BlameBillCosby.com
  15. Case of government being overzelous? by dog77 · · Score: 3, Interesting

    There was a total of only $50,000 in transactions that were in violation, and from the article it appears that Paypal failure was that their screening system did not work very well, but they eventually fixed it. Should that warrant $7,000,000 fine? It seems excessive to me.

    1. Re:Case of government being overzelous? by Anonymous Coward · · Score: 0

      Especially considering the sweetheart deal HSBC got for far far far far worse violations.

    2. Re:Case of government being overzelous? by Anonymous Coward · · Score: 0

      further proof that paypal is not a bank. if they were a bank, the fine would be a gift of $billions from the federal reserve and get-out-of-jail free cards for all executives.

    3. Re:Case of government being overzelous? by Anonymous Coward · · Score: 0

      No kidding. A pitiful 3 billion in fines, for laundering money in mexico for drug cartels, as well as Iran for at least a decade, even after being asked nicely by the justice department to please stop at least twice.

    4. Re:Case of government being overzelous? by Anonymous Coward · · Score: 0

      The USA government need some way to offset their debt.

      Taking it from an European company seemed the best way to do that without being pilloried by the right.

    5. Re:Case of government being overzelous? by frank_adrian314159 · · Score: 1

      Gosh. They knew about the law beforehand and ignored it. Why should the little darlings be fined? After all, if you were a kid caught with an ounce of coke, you'd be doing time and that's right! But charge a bidness a few bucks for breaking the law? Unconceivable!

      --
      That is all.
  16. Unjustified while destroying business and profits by Anonymous Coward · · Score: 0

    The ridicules costs which we're all paying for through various means are being added by law in order to inhibit a small group of potentially very horrible people from making money is just insane. I was charged $10 by my make for example because of some ACH transaction that occurred as the result of not having adequate funds in our paypal account. Apparently every time you do an ACH transfer where the money is then sent onto people overseas the money must be audited multiple times. It appears the charge is legally required to boot. For anybody who does a lot of international business these charges add up quick. Just imagine how much of a drain it has on our economy. The reality is we're losing more economically than the entire group of 'bad people' being targeted are losing due to the increased economic costs.

  17. $7.7 million for such companies by m.alessandrini · · Score: 1

    Is like the change I have in my pocket. They payed to keep doing whatever they want.

  18. c2it and Citi by tepples · · Score: 1

    How so? This article states that Citigroup announced the closure of c2it, and not because of any trademark violation.

  19. Regulate them by forrie · · Score: 1

    Here in the US, at least, I would like to see entities like PayPal regulated within the banking industry.

    Over the years, I have heard of and even personally experienced PayPal's many abuses. Written correspondence from the company demonstrates they believe they are above the law and are in their own world. Time for that to stop. The topic of this article withstanding as an even larger concern.

    I find it odd that my local State representatives will respond to other inquiries, but when I bring up PayPal it's radio silence. I think the problem goes a little deeper -- and of course it may, it's involving money :-)

    Just my 2 cents.