PayPal Pegged With $7.7 Million Settlement for Violating US Treasury Department Blacklist

PayPal has agreed to pay a large settlement fee for allegedly processing transactions from individuals based in countries under sanction.

A claim made by the US Treasury Department suggested that one of the accounts handled by the company was connected to purchases on the black market.

PayPal was accused of failing to implement a thorough screening process until 2013. In 2011, the payments giant rolled out a series of updates that allowed it to pend questionable transactions for further vetting.

Despite PayPal’s willingness to settle the charges, it did not admit or deny the allegations. During the settlement agreement, the company provided relevant transaction data to the US Department of Treasury’s Office of Foreign Assets Control (OFAC).

The information cited over 500 processed payments from Cuba, Iran, and Sudan. Furthermore, the investigation uncovered transactions made by Kursad Zafer Cire, an individual on the US Federal Watchlist for taking part in weapons of mass destruction deals. PayPal flagged the suspicious transactions, but did not prevent him from using the service until the seventh time.

Gene Truono, PayPal chief compliance officer, released the following details on the system’s scanning capabilities:

“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.”

According to Amanda DeBusk, a partner at law-firm Hughes Hubbard & Reed LLP, the OFAC is currently clamping down on nonbank financial companies.