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PayPal in hot water with the US Government

The online payment company PayPal agreed to pay the US government $7.7 million (£5 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.

One of those involved in the case was Kursad Zafer Cire, who was named by the US State Department back in 2009 as a person linked to programmes involving weapons of mass destruction.

The problem seems to be in the delays in scanning, PayPal said to the BBC (opens in new tab).

The US Department of Treasury’s Office of Foreign Assets Control (OFAC) says PayPal failed to adequately screen and prevent transactions to users in Iran, Cuba and Sudan.

The company introduced policies which banned the transactions to those countries back in 2006, but they were lax until 2011, when the company implemented a “short term fix”.

The ‘short term fix’ allowed PayPal to "scan live transactions for sanctions-related keywords and evaluate any potential matches while the completed payments were held in a pending status,” Ars Technica reports (opens in new tab).

However, the fix didn’t really fix things, and PayPal ended up processing a total of 486 transactions between 2009 and 2013, and were worth almost $44,000 (£29,500).

The Treasury Department said: "For several years up to and including 2013, PayPal failed to employ adequate screening technology and procedures to identify the potential involvement of U.S. sanctions targets in transactions that PayPal processed."

Under the terms of the settlement, PayPal did not admit or deny it had violated the sanctions.

"Since then, we've taken additional steps to support compliance with Ofac regulations with the introduction of real-time scanning of payments and improved processes," a PayPal representative told the BBC.

Sead Fadilpašić is a freelance tech writer and journalist with more than 17 years experience writing technology-focussed news, blogs, whitepapers, reviews, and ebooks. And his work has featured in online media outlets from all over the world, including Al Jazeera Balkans (where he was a Multimedia Journalist), Crypto News, TechRadar Pro, and IT Pro Portal, where he has written news and features for over five years. Sead's experience also includes writing for inbound marketing, where he creates technology-based content for clients from London to Singapore. Sead is a HubSpot-certified content creator.