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).
In its settlement agreement with PayPal, the Treasury accused the company of failing to screen its in-process transactions until 2013. Although the company made moves to prevent transactions involving sanctioned countries as early as 2006, its policies were lax until, in July 2011, the company implemented a “short term fix” in which PayPal could “scan live transactions for sanctions-related keywords and evaluate any potential matches while the completed payments were held in a pending status.”
That short-term fix didn’t prove to be up to snuff in keeping forbidden transactions from being processed, however, and between 2009 and 2013 PayPal ended up processing nearly 500 transactions worth more than $40,000 for goods and services going to Cuba, Iran, and Sudan, as well as $7,000 in transactions involving Kursad Zafer Cire, a Turkish man on the US State Department’s list of Weapons of Mass Destruction proliferators. According to a Treasury Department enforcement information page, PayPal’s short-term fix filter flagged Cire’s transactions seven times, but it wasn’t until the seventh instance that PayPal blocked his account.
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