PayPal fined millions for “reckless disregard” of sanctions

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PayPal is to cough up $7.7m in fines after a US investigation found that it processed hundreds of illegal transactions involving blacklisted countries and individuals linked to terrorism.

Banned recipients included accounts in Iran, Cuba and Sudan, as well as a known associate of Pakistani scientist Abdul Qadeer Khan, who is believed to have offered nuclear expertise to Libya, North Korea and Iran.

“For several years up to and including 2013, PayPal failed to employ adequate screening technology and procedures to identify the potential involvement of US sanctions targets in transactions that PayPal processed,” said the Office of Foreign Assets Control (OFAC), part of the US Treasury.

“As a result of this failure, PayPal did not screen in-process transactions in order to reject or block prohibited transactions pursuant to applicable US economic sanctions program requirements.”

During the five year period, PayPal processed 486 sanction-breaking transactions worth $43,934 in total – a fraction of the value of the fines.

OFAC described the breach as “egregious”, adding that the company had exhibited “reckless disregard” by dismissing risk alerts that flagged in its internal systems when the transactions matched banned accounts.

However, it conceded that the wrongdoing was slightly mitigated by PayPal’s willingness to cooperate fully with the investigation and its appointment of “new management within its Client Division” that sought to strengthen its OFAC screening process.

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