Patriot act - an abuse of the new power?

[Klaus]

From:

http://www.siliconvalley.com/mld/siliconvalley/news/local/5532248.htm

Posted on Tue, Apr. 01, 2003
PayPal violated law, says filing
By Mary Anne Ostrom
Mercury News

A federal prosecutor in Missouri is claiming that PayPal, eBay's online payments subsidiary, violated the USA Patriot Act by processing Internet gambling transactions, the online auctioneer said in a federal regulatory filing.

The act, passed a month after the Sept. 11 terrorist attacks, strengthened the law prohibiting the transmission of funds generated from a criminal offense or intended to support unlawful activity.

EBay said it received a letter Friday from the U.S. Attorney for the Eastern District of Missouri ``indicating its contention'' that PayPal violated the act. The U.S. Attorney's Office's stance subjects PayPal to ``potential civil forfeiture'' of earnings from the transactions as well as potential criminal liability, eBay said.

The letter also offered a settlement of possible claims if PayPal agreed to turn over its earnings from online gaming sites between Oct. 26, 2001, and July 31, 2002, plus interest.

EBay responded in a Securities and Exchange Commission filing that PayPal had acted in ``the good-faith belief'' that it had not violated the act. While not disclosing the proposed settlement amount, the company said it was more than what PayPal earned from online gaming transactions during the period, which occurred before eBay bought PayPal.

EBay spokesman Kevin Pursglove said company lawyers are reviewing the settlement offer and no decision has been made on whether to accept it.

EBay completed its $1.5 billion purchase of PayPal in October 2002 and stopped processing online gambling payments in November, citing regulatory uncertainty.

For all of 2002, about 6 percent of PayPal's $237 million in revenue came from processing online gaming payments, eBay said.

``This validates eBay's decision to discontinue PayPal's online gaming activities,'' Pursglove said. ``Bottom line, this is non-material to eBay's business and will not impact cash flow or earnings.''

The Patriot Act increased prison terms and financial penalties for certain financial crimes, expanded U.S. criminal law to include offenses such as cash smuggling and operating illegal money-transmitting businesses, and called for forfeiture of assets.

Responding to a federal grand-jury subpoena, PayPal in July provided documents and information related to its services for online gambling merchants at the request of the U.S. Attorney for the Eastern District of Missouri.

Ray Gruender, the U.S. attorney, was appointed to that post in 2001 by Attorney General John Ashcroft, a critic of online gambling, and was previously a corporate fraud specialist in private practice.

Gruender's office had no comment Monday about PayPal and eBay.

In an unrelated settlement in August, PayPal agreed to stop processing gambling payments for New York residents and paid $200,000 in penalties and to cover investigation costs of the New York Attorney General's Office.

Several major credit-card companies in recent years also have stopped processing online gambling payments. Gambling online is banned in the United States but an estimated 5 million Americans participate through off-shore entities.

Online gambling is also under fire in Congress, where both the Senate and House are considering legislation to close loopholes in current law, including barring credit-card issuers, banks and other financial institutions from processing payments.

But since PayPal has exited the business, alternative payment mechanisms have cropped up, including credit and debit cards offered by foreign processors.

I'm missing the link to terrorism (wasn't that the idea of the patriot act?)
..also this makes me affraid of patriot act II
Klaus

 

[MissVelvetDress_75]

i just had to take a test on this for work and i passed. a lot of this makes sense in the line of work i do and i think it is very interesting. it has a lot to with money laundering and money trails that are not being properly documented in over seas accounts.

 

[Klaus]

MissVelvetDress_75:

So having oversea accounts (like lots of big companies to save tax-$) will fall under the patriot act too? How about international stocktrade? (Nasdaq & Co.)?

Klaus

 

[MissVelvetDress_75]

i am trying to find some information to post that would explain everything that is under the patriot act. if can find the info, i will post it, but right now my desk is a complete disaster and i can't find a damn thing. lol

 

[MissVelvetDress_75]

klaus,
here is some info. about it.

[q]The USA PATRIOT (Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism) Act obligates all financial institutions to prevent and detect money laundering. Financial institutions include banks, savings associations, and credit unions, as well as insurance companies, securities firms, money services businesses (such as money transmitters and currency exchanges), and futures commission merchants.

These companies must have in place an anti-money laundering program that includes--at a minimum--internal policies, procedures, and controls; a designated compliance officer; an ongoing employee training program; and an independent audit function to test the program.

*edited to add the below:

In October 2001, the president signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act, with the goal of creating a number of mechanisms to combat international terrorism. Among other things, this law significantly expanded companies' obligations to detect and prevent money laundering. The act's anti-money laundering provisions apply to all money laundering activities, not just those related to terrorism.
[/q]

and some basic info on the laws
[q]Numerous regulators have issued regulations and guidelines to help firms meet their obligations under the USA PATRIOT Act. One that publishes many of the regulations is the Financial Crimes Enforcement Network (FinCEN), an agency of the U.S. Treasury Department.

The implementation of the USA PATRIOT Act points to a new era of combating terrorists and money launderers. By striking at the money, financial institutions can help prevent these criminals from having access to the funds necessary to engage in their illegal activities. [/q]

i don't know if that helps with answering your questions.

 

[Klaus]

Velvet: thanks!