It’s easier to comply than to deal with the consequences of getting caught! PayPal was just given 7.7 million reasons to remember this lesson. The company has agreed to pay $7.7 million in penalties for violating U.S. sanctions against Cuba, Iran, and Sudan, and for processing transactions involving an individual on the list of Specially Designated National (SDN) and Blocked Persons.

Fortunately, for PayPal, one way to “comply” is to self-report any violations. The company voluntarily disclosed 662 violations. The related transactions were valued at a total of just over $51,000. However, the Office of Foreign Assets Control (OFAC) which oversees US sanctions programs has legal authority to assess fines of up to $10 million for each violation. In fact, OFAC originally sought a penalty of $17 million. The government agreed to the reduced settlement down to $7.7 million because PayPal:

  1. Voluntarily disclosed the violations; and
  2. Strengthened its compliance program.

PayPal has its origins in the innovative idea of a digital wallet dreamed up by Peter Thiel and Max Levchin. Starting as a small cutting edge company it is possible to see how the company failed to pay attention to all of the legal implications of its operations. However, this is no excuse. In fact, the time to pay attention to this lesson – it is easier to comply than to deal with the consequences of getting caught – is at startup!A wake-up call can come in the form of a heavy fine, loss of export privileges, or even criminal charges.

What To Do


This is why it is cheaper to comply than to get caught. All companies, even the smallest, need to cultivate a corporate culture of compliance. A compliance program is about: (1) knowing the rules that can impact your business; and (2) putting in place the systems to monitor and minimize the risks associated with breaking those rules, deliberately or inadvertently.

Just as the business owner puts in place procedures to minimize the risks of fraud or theft, entry into the global market place requires additional procedures associated with doing business internationally. A corporate culture of compliance signals that the company aims to comply with relevant laws and regulations and leads to drastically reduced penalties even in the event of a violation.

Contact us for assistance with developing a corporate culture of compliance.

DevelopTradeLaw, LLC provides business-oriented advice to the legal challenges that face companies doing business internationally. Contact us for more information or advice on the topic of this article.