Lorne Wald thought he had run into a technical glitch on a Friday night in early August when PayPal halted his attempts to purchase two books. The 60-year-old retired IT worker in Mount Royal, Que., has had a PayPal Inc. account since the online payment platform came to Canada in late 1990s and has never had any trouble buying things online.
When he contacted the company's customer service, he was informed by a representative that "the payment was pending clearance by OFAC [the U.S. Office of Foreign Asset Control]." He asked if he could simply cancel the purchase, and was told no, it would have to be adjudicated by PayPal's compliance team. "It sort of creeped me out," Mr. Wald says. "If they are going to try to crack down on crime that's all very noble, but then it's in your face; and this is a $20 transaction."
The idea that OFAC would have any interest in a middle-aged Montrealer's book purchases – from a Canadian online bookstore no less – seems bizarre. But the explanation offers insight into the ways that multinational online vendors are increasingly recruited as unofficial enforcers of policy objectives set in the United States and other jurisdictions.
In 2015, the U.S. Treasury department and OFAC fined PayPal $7.6-million (U.S.) over $44,000 in illegal transactions that stretched back years and involved nuclear arms proliferaters, as well as Iranian, Sudanese and Cuban nationals. The government agency said San Jose, Calif.-based PayPal had demonstrated a reckless disregard for sanctions and the company entered into a settlement agreement that promised it would get tougher on suspect transactions. The government did not specify how PayPal should do that, simply that it give OFAC a presentation on its efforts to comply with its regulations.
OFAC pointed to its settlement with PayPal but declined to comment further.
Users have discovered that there seems to be an opaque list of potentially sensitive keywords that can result in PayPal rejecting many benign transactions, such as a collector's attempts to sell trading cards of NFL player Ameer Abdullah. BuzzFeed News documented the case of Canadian Clint Lalonde having charitable donations mentioning "Syria" blocked by PayPal. The Daily Mail has noted that PayPal blocked many transactions to residents of Oxfordshire that happened to live on streets named Isis (there are several in the British county that names its stretch of the River Thames after the Egyptian god Isis, not the terrorist army in Iraq and Syria). Just last week, (Aug. 17) the California-based editor of a book review website said PayPal blocked her attempt to pay a writer's invoice for a review mentioning Cuba.
Mr. Wald has previously used PayPal on the website of BookOutlet.ca, an online bookstore with its head office near St. Catharine's, Ont., with no difficulty. He said BookOutlet customer service told him that PayPal "tends not to want to process orders with 'suspicious' titles."
BookOutlet Marketing Director Ian Michael called such incidents "very rare" and that while the company sells thousands of books across Canada "days and weeks can go by without a problem." He also said BookOutlet has not raised any issues with content filtering with PayPal or other processors.
A representative of Canada's largest book seller, Indigo Books and Music, said her company has not been affected.
"This has not been our experience with PayPal. We've had no issues to report," said Janet Eger, Indigo's vice-president for public affairs.
PayPal says it's not in the business of banning books, but it acknowledges that its systems sometimes stop completely innocent purchases from going through.
"CDs, artwork and things like that are exempt from OFAC regulations," said Malini Mitra, head of corporate communications for PayPal Canada, in an e-mail. PayPal followed up with another statement: "In certain cases, if it's not clear the payment is for a book, our customer support team may ask questions to clarify." That clarification process can delay a purchase 24-72 hours.
PayPal's profits are derived from scale. It takes a tiny chunk, usually somewhere around 3 per cent, of every transaction. Anything that stops a transaction is referred to as "friction" in the e-commerce game, and yet PayPal is clearly causing some friction for lots of users.
"The whole point of PayPal is they can scale by automating things, so the only way they can monitor all the transactions that go through there is through things like keyword searches, but those are inherently broad: These mechanisms lead to many false positives," says Tamir Israel, staff counsel at the Canadian Internet Policy and Public Interest Clinic.
But these occasionally absurd outcomes are also the responsibility of OFAC and the way it structured its settlement agreement, he said.
"Intermediaries [such as PayPal] are increasingly leveraged to get at public policy objectives, usually in very coarse ways that are less targeted than is typically the case in other policy contexts, and it leads to lots of problems," says Mr. Israel, who argues OFAC's fine created an incentive for PayPal to build a system that was intentionally overzealous.
Other examples of this kind of automation include Alphabet Inc.'s notice-and-takedown system on Google search results. Takedowns are required by section 512 of the U.S. Digital Millennium Copyright Act, but a joint Columbia and Berkeley study released in March, 2016, audited 100 million randomly selected notices in a six-month period and found nearly 30 per cent of the requests were likely false positives.
"In one in 25 cases, targeted content did not match the identified infringed work, suggesting that 4.5 million requests in the entire six-month data set were fundamentally flawed," the authors wrote. A similar but voluntary system on YouTube called Content ID pre-emptively scans material and checks it against content uploaded by copyright holders, and has resulted in many reports of false positive takedowns and poor protections for videos that fall under fair-use or fair-dealing provisions.
Mr. Wald's case was easily resolved: He used a credit card and just ordered the books again (he has his books now but has not yet tried any of his new Persian recipes). PayPal refunded his account for the aborted transaction the next day. And while he says he hasn't used his PayPal account since, he's not deleting it: PayPal sometimes has good promotions and he's a sucker for a good deal.
"I don't want to burn bridges, but my preference has certainly changed," says Mr. Wald, who has some worries that his attempts to buy a Persian cookbook has added him to some shadowy U.S. government database of bad actors. "People jokingly saying to me, 'You'll have to see what happens the next time you go over the border.'"