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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)."

11 of 68 comments (clear)

  1. 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 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.
  2. 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 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".

    3. 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.

  3. 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
  4. 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.
  5. 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
  6. 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.