A federal prosecutor has alleged eBay Inc. unit PayPal violated a 2001 anti-terror law aimed at fighting money laundering when it provided payment services to online gambling companies, the Web auctioneer said in its annual report filed Monday.
Silicon Valley-based eBay said it received a letter 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. Kevin Pursglove, eBay"s spokesman, told Reuters the company"s lawyers were reviewing the letter.
Congress passed the Patriot Act one month after the September 11, 2001 attacks on New York City and the Pentagon. The legislation broadened law enforcement powers, especially to combat money laundering that is believed to help finance terror attacks.