PayPal to Pay out $7.7 Million for Allowing Payments to Accounts on the US Sanction List

PayPal in a settlement reached Wednesday with US Treasury Department agreed to pay $7.7 million to the US government following allegations that it processed payments transactions for a number of companies and individuals that are on the US sanctions list.

While neither confirming nor denying the allegations, PayPal also voluntarily handed over its transaction data to the US Department of Treasury's Office of Foreign Assets Control (OFAC). As alleged in the Treasury's report, a total of 486 violations of US regulations had apparently been committed by PayPal "for several years" until April 2013 when the company finally implemented a "long term solution" in which it "began screening live transactions against OFAC's List of Specially Designated Nationals and Blocked Persons (the 'SON List') and an expanded version of PayPal's list of sanctions-related keywords."

While the severity of each instance varied, the Treasury highlighted a number of transactions that specifically relate to Turkish national Kursud Zafer Cire -- an individual on the list after suspected involvement in the movement of weapons of mass destruction. The Treasury's report states that Risk Operations Agents at PayPal manually overrode at least four alerts flagging Cire as blacklisted -- resulting in transactions totaling over $7,000. According to the Treasury Department, PayPal's short-term fix filter flagged Cire's transactions seven times, but it wasn't until the seventh instance that PayPal finally blocked his account. Cire was blacklisted in 2009 for his alleged involvement in a sales network for nuclear technology operated by Pakistani scientist A.Q. Khan. This provided 'one-stop shopping' for countries including Iran, Libya and North Korea to develop nuclear weapons, the Treasury said.

In an e-mailed statement, Gene Truono, chief compliance officer for PayPal, told ArsTechnica: "Government compliance is a priority and a central component of how we do business around the world. We recognize that prior to April 2013, PayPal did not have a system that could scan payments in real time in order to block prohibited payments. There was a delay in the scanning, which allowed some prohibited payments to be processed. In many cases, those payments were detected and reversed. As part of our commitment to compliance, we hired the right people, increased our compliance budget, and over two years worked to build a new scanning payment system. We've now put in place proprietary state-of-the art systems that allow for real-time scanning of potentially sanctioned payments before they are processed."