Paypal anti-laundering safety regulations

Daniel Pataki
Dec 2, 2008
Updated • Dec 13, 2012

I have been an active Paypal user for a while now, and I was surprised when Paypal sent me a letter asking me to verify that indeed I am not laundering money. Do I need to send photos of my apartment so it is apparent I do not have a printing press at home?

Nope, I needed to send some ID and utility bills. The process was fairly simple, I took a photo of my phone bill, my AmEx report and both sides of my National ID. In the Paypal documentation they say a phone bill is not ok, but since my apartment is not on my name I don't pay bills per se. Nevertheless, I sent these all off.

After some mucking about (the form was not the best), Paypal accepted these documents and this, as a lot of government and verification processes puzzles me a bit. I mean I could've Photoshopped all that right? Unless they actually checked with my government and bank and carrier service, which I'm sure they didn't, they replied in like 2 days, they can't be really sure.

My reasoning is that someone like me would have to go to more trouble to prove his identity and location truthfully, than a money launderer would have to go to to forge this stuff. If I didn't have a camera I would've had to spend about $30 to photocopy, print, scan and so on. A money launderer may have to pay $1,000 for a good forgery, but hey, he has a printing press right, money comes easily.

The point is, that all I proved is that I have an Internet connection and probably an ID. Is this a process that is supposed to deter people on the wrong side of the law? I doubt if it does, it did deter me though, my account was even frozen for a while!


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  1. Daniel said on December 4, 2008 at 7:33 am

    Hi Lt. Dan.

    This is the one thing I will never understand. If you are not dealing with illegal stuff, who cares who builds a profile of you? They have my picture, my address, my phone number and my birth date. Seriously, what can they do to you?

    If someone wants to look at my personal dealings I invite them too.

  2. Lt. Dan said on December 3, 2008 at 5:34 pm

    What I don’t like about having to provide so much personally identifying information is that I find it quite invasive and it allows them to build an intrusive profile of who you are and where you are, build on that profile over time, and share the information with people you would rather not have your personal information. It’s like giving them a web cam into your personal finances and dealings. It’s actually quite scary to me.

  3. Daniel said on December 2, 2008 at 11:32 pm

    Just to clear things up, I am finishing university and getting an MBA soon, I actually do know what money laundering is, it was just my sad attempt at some humor :)

    Anyways, it is just a show and they ask for it at a quite low level, I can’t remember what it is, but I can assure you I am not rich (yet) :)

    I have no problem trusting Paypal despite what Mike is saying. I’ve also heard reports that Paypal was not the best on customer servce though :( However, I wish I could have losses of $6900, that would mean I actually earn that much :D

  4. Marc said on December 2, 2008 at 7:00 pm

    This anti-laundering law is just a bureaucratic show. All financial institutions must comply and “investigate” any “suspicious” activity. the only goal of the letter you received to is to get the paperwork filled so that Paypal is clean if you are actually laundering money. Since they are not the police and cannot contest the validity of the provided documentation and in shot, it is a useless law which is only a bureaucratic overhead and a show.

  5. Leandro said on December 2, 2008 at 2:41 pm

    It may seem nonsensical that they ask for the info in that way (scanning and emailing), and as you point out, it is easily forged. However, PayPal is clearly doing this just to cover their own butts and comply with whatever relevant legislation may exist. If they don’t ask for anything, they’re not in compliance; if they ask and you send the real info, they’re in compliance; if they ask and you send forgeries, you’re subject to prosecution for forging documents, but they’re in compliance for having asked.

  6. Joshua said on December 2, 2008 at 1:46 pm

    Oh, I’ve been though that same process. It was a bit annoying, but nothing too bad.


    I’m sorry to hear that! I’m glad you found a payment gateway that suits your needs.

  7. Martin said on December 2, 2008 at 11:41 am

    Oh yeah, money laundering is not what you are describing in the article Daniel :)

    The relative low sum that initiates the money laundering process at PayPal (was it 12K ?) suggests that they are not doing this because they have to at that point.

  8. Martin said on December 2, 2008 at 11:38 am

    It was not me, that’s all I can say. But I had to go through the same process back then in 2007 :) I only did send my ID and nothing else and that seemed to have been sufficient. Their wording on that page is kinda weird.

    One could think they want you to send all of it. But then again I’d say that PayPal is nice if you are the buyer and bad if you are the seller.

  9. Mike said on December 2, 2008 at 11:14 am

    I do not know why everyone thinks PayPal is the ultimate payment gateway. I used to be a merchant but no more. Not after a loss of $6900 and they made no effort to help in recovery. Now I use 2Checkout and ClickBank and don’t get hassled.
    My final opinion is that PayPal cannot be trusted because they will find a way to totally screw their customer. Just give them an inch and they take a mile. I went through the same thing having to send them information TWICE! This was before I got screwed. My advice? DO NOT trust PayPal.

  10. Daniel Pataki said on December 2, 2008 at 10:39 am

    No it was ok :) The email didn’t have any suspicious links and you had to prove everything signed in, I checked the certificate too :)

  11. Arvin Bautista said on December 2, 2008 at 10:37 am

    I think you are mistaking money launderer for counterfeiter. While they certainly have intersecting circles in the criminal world, a money launderer does not print their own money; they actively transfer funds from one source to another in such a way as to not leave tracks as to where the money came from.

    Using paypal, a money launderer might be able to divert funds that would otherwise be taxed in their country into an account seemingly located in another country, where taxes might be lower. Likewise, if a person is selling goods illegal in their country but legal in another, they might set up a paypal account in the other country but through other accounts have eventually get to their real account.

    The movie Office Space has a hilariously classic scene in which the hapless heroes have to launder money, but realize none of them know what laundering money means :)

  12. Jojo said on December 2, 2008 at 10:36 am

    Strange! ummm, are you moving large sums of money through PayPal regularly? Getting rich blogging Martin? [lol]

    Out of curiosity I did a Google search and found some info including:

    And a bunch of hits by doing a Google site search using:


  13. Paymun Ghaemi said on December 2, 2008 at 10:20 am

    Hey are you sure it wasnt a phishing email? Did you try contacting paypal by phone regarding this issue?

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