EBay's PayPal auction payment unit is under
investigation for possible violations of the USA Patriot
Act.
A letter from the US Attorney's office for the Eastern District
of Missouri stated that PayPal's earlier practice of providing
payment services to online gambling merchants violated provisions
in the Patriot Act that "prohibit the transmission of funds that
are known to been derived from a criminal offence or are intended
to be used to promote or support unlawful activity".
Kevin Pursglove, an eBay spokesman, said the company's attorneys
are reviewing the allegations, which addressed an issue that
happened nearly two years ago, before eBay's aquisition of PayPal
last July. As part of its acquisition of the online payments
company, eBay said it would pull the PayPal unit out of the
gambling transaction business.
According to eBay's financial filing to the Securities and
Exchange Commission, the US Attorney's letter said the alleged
violations expose PayPal to "potential civil forfeiture of the
amounts it received in connection with such activities", as well as
"potential criminal liability".
The letter offered to rescind the allegations if PayPal paid the
amount of money it earned by handling online gambling transactions
from26 October 2001 to 31 July 2002, plus interest.
In the filing, eBay stated that PayPal "acted in the good faith
belief that its conduct did not violate [the statute]". The company
also claimed that its earnings from the transactions were lower
than figures asserted by the government.
The USA Patriot Act, which gives law enforcement authorities
expanded tools for investigating and deterring future terrorist
acts, was passed a month after the 11 September terrorist attacks
on the US in 2001.