PayPal, now owned by eBay, has been accused of violating the Patriot Act by providing payment services to online gambling operations:
- Silicon Valley-based eBay said it received a letter on Friday in which the U.S. Attorney for the Eastern District of Missouri accused PayPal of violating a provision of the USA Patriot Act.
The provision prohibits the transmission of funds that are known to have been derived from a criminal offense, or are intended to be used to promote or support unlawful activity.
The prosecutor also said the company could be forced to forfeit the money it received in connection with the alleged illegal activity and that it could also be criminally liable.
eBay said in its annual report that PayPal acted in the good faith belief that its conduct was not in violation of the anti-terror law
….In November, PayPal stopped processing payments for online gambling companies, an activity that accounted for about 6 percent of PayPal’s 2002 revenues, eBay said.
The prosecutor’s letter offered a plan that would enable the company to settle all charges and claims, if PayPal turned over earnings, plus interest, from online gambling companies for the nine-month period ended July 31, 2002, eBay said.
eBay said earnings associated with the activities were smaller than the amount stated in the prosecutor’s letter. It also said the related amount was not expected to have a material impact on its financial position, results of operations, or cash flow. [Reuters]
I guess the feds are serious about going after online gambling, although this would appear to be stretching the intent of the Patriot Act in just the way critics have feared.