Expose : PayPal, Amazon and eBay Iranian Rial Scandal with Millions of Sales

Whether knowingly or not, Americans are illegally buying Iranian Rial, while eBay, Amazon and PayPal are helping them in open defiance of U.S. law and international sanctions against Iran. In fact, these U.S-based illegal Rial sales appear to amount to more than $1,900,000 during the past 90 days alone.

See the full text of the Presidentís Executive Order here

In particular, Section 2 (i) says itís illegal and they are guilty of violating the sanctions:

(i) that the person has materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any Iranian person included on the list of Specially Designated Nationals and Blocked Persons maintained by the Office of Foreign Assets Control (SDN List) (other than an Iranian depository institution whose property and interests in property are blocked solely pursuant to Executive Order 13599 of February 5, 2012) or any other person included on the SDN List whose property and interests in property are blocked pursuant to this paragraph or Executive Order 13599 (other than an Iranian depository institution whose property and interests in property are blocked solely pursuant to Executive Order 13599);

So, why arenít these companies being held accountable for violating the Executive Order?

When Americans buy Iranian Rial through sellers with listings on eBay, Amazon and other platforms, PayPal processes the transactions, and thus provides the Iranian government with access to American cash via currency smugglers and organized crime. Yet, according the U.S. government, Iran is still a ďstate sponsor of terrorismĒSee the U.S. State Departmentís terrorist list here.

Right now, without any checks or balances you could set up an eBay account for an Iranian Terrorist sell Illegal Rial and process the payments via PayPal! Does anyone else see a problem with this?

SECTION 1: Why does licensing and regulation matter in currency sales? See the 7 reasons

Take a look below at the licensing required for legitimate businesses to sell currency both Federal and State requirements are not met by eBay and Amazon sellers. FinCen is a department in the US Treasury that regulates financial services companies. Unlike the State Licensing, FinCen doesnít require companies to undergo an approval process. Any firm can register with them in about 20 minutes.

1. FinCen Regulates The Following Transactions:

Transactions that exceed $1,000 per customer within a 24 hour period. If a dealer conducts any transaction that exceeds $1,000 in an individual transaction or multiple transactions of the same buyer that exceed $1,000 within a 24 hour period, the following information must be kept and stored in the event of a FinCen audit:

  1. Customer Name
  2. Customer mailing address
  3. Customer Social Security Number
  4. Government Issued ID
  5. Currencies the customer is purchasing
  6. Gross profit on transaction
  7. Date of order
  8. What the customer paid with
  9. OFAC Check

The records of these transactions must be held on file for 5 years.

FinCen also scrutinizes all transactions exceeding $10,000. The regulator requires all of the information listed above, in addition to a CTR filed with FinCen. A CTR (Cash Transaction Report), where FinCen wants all the details entered into their database for review.

FinCen also requires a SAR (Suspicious Activity Report) to be completed in some instances. This form must be filled out for any transactions that may arouse suspicions due to potential irregularities. It must be submitted to FinCen immediately.

There are multiple listings on eBay exceeding the FinCen limits without proper record keeping or filing.

The sellers that are violating these rules on eBay, Amazon, and PayPal are not registered with the UST. Itís impossible to comply with the FinCen record keeping regulations while selling currencies in a third party marketplace without access to customer data. Since the customers are virtually anonymous, sellers are unable to collect the customerís social or Government issued ID.

Sellers that violate FinCen reporting and record keeping rules and regulations are committing a Felony and subject to a $5,000 fine. Thousands of these transactions have happened on eBay, Amazon, and through PayPal. Since these companies facilitate the transaction, they are also guilty of failing to comply and risk facing the same penalties.

2. State Licensing Requirements

Over 20 US States require people that sell currency to be licensed by their state financial regulators. The state licensing process is in-depth with no guarantee of approval. Unlike the FinCen registration that virtually any seller of a currency can be approved for, the State licensing is much more stringent.

Every state has different approval requirements, but the following requirements generally apply:

  • Complete AML program
  • Have a full-time Chief Compliance Officer
  • Meet minimum business net worth requirements
  • Complete certified financial audits by a CPA
  • Undergo a criminal background check via the FBI
  • Fingerprinting placed on file
  • In-depth analysis of business activities, websites, office locations and other assets
  • Be bonded and Insured. (An expensive process that can easily cost over $100k per year)
  • Submit application fee (some states donít charge a fee while others charge over $10,000)
  • List of Agents (People that sell under your licensing)
  • Monthly, Quarterly, BiAnnual, Or Annual reporting. Typically gross amount sales and gross amount earned from the exchange

Conclusion: State licensing is extremely expensive and time consuming. None of these eBay sellers meet the licensing requirements, therefore they are operating illegally in these states and using eBay, Amazon and PayPal to illegally distribute currencies.

Penalties for violating state regulations are very harsh and in some cases require violators to refund 100% of the proceeds to their customers. In addition, regulators can impose severe fines and ban companies from operating in the state altogether or even file criminal charges.

3. AML Compliance

Since the penalties for violating these regulators are so strict, companies are required to have an AML (Anti Money Laundering) program. This provision of an AML program can be anywhere from 5 pages to 500 pages depending on the size of the company and the depth of their network.

The AML program explains internal company processes to combat money laundering, including compliance collection and reporting.

4. Agency Relationships

Agency relationships allow companies to operate non MSBs / unlicensed state currency exchanges under their license, which means the company is responsible for their activities and in most cases the fulfillment of the product being sold.

In order to be an agent of another organizationís license, an entity must undergo the same in-depth, due diligence process that applies to license holders, because they are accepting liability for all of those agents. If an agent goes rogue, then the license holder will face the same consequences.

A good example of an agency relationship is Western Union and Publix Supermarkets. Publix sells the WU services to their consumers and Publix receives a share of the profits, without having to be licensed themselves. WU will hold the licensing, handle reporting, compliance, etc. Agents allows MSBís to scale their operations, but itís up to the MSB to be selective with their agents due to the immense risk.

eBay, Paypal, and Amazon may be properly licensed, but they facilitate illegal currency transactions on their platforms. None of these companies would extend their licensing via an agency relationship with a small time marketplace seller, especially when these sellers are selling the currency from countries listed on the Terrorist Sanction list and are processing transactions that exceed reporting thresholds without complying with the FinCen KYC requirements or state licensing compliance requirements (which have no minimum reporting requirements).

5. Banking Regulations

Getting legal, banking as a Money Service Business (MSB) is a tough ordeal for new and established companies alike. Due to the account risks and the repercussions, if the bank collaborates with a poor or fraudulently operated MSB, significant fines and criminal felonies can be brought against all parties involved, including the bank. These eBay and Amazon sellers are not registered or licensed, their banks almost certainly do not know what they are processing for. Businesses that lie to their bank about the nature of their business are committing felonies (bank fraud), so eBay and PayPal are aiding and abetting additional criminal activity every time they allow that seller to withdraw funds to their bank for illegal currency transactions.

6. Consumer Risk

Consumers could also be harmed by illegal transactions. The State licensing and FinCen was put in place to combat illegal financial services companies and money laundering.

Most consumers probably have no idea that it is illegal to own or purchase the Iranian Rial and that they could be funding terrorist activities by doing so.

Itís not the consumerís responsibility to understand the complexities of the money services industry. Sellers should be expected to operate within the law, but many are clearly failing to do so.

7. Source of Currency

The source of the currency is another major compliance hurdle that compliant company takes very seriously. They go to great lengths to make sure they are buying currency from legitimate sources that are not involved with terrorism or other illegitimate activities. Since no legitimate source sells the Iranian Rial, the seller, their bank, eBay, Amazon and PayPal are at risk.

SECTION 2: There is no legal way to import currency from Iran: See the 4 points given

One investigator conducted a test and contacted various online suppliers and asked them to supply the Iranian Rial. One anonymous person was contacted who said he could obtain Rial. Here is a screenshot the corresponding message exchange over WhatsApp:

Whatsapp Message

This dealer clearly admits the currency is smuggled through Jordan and then onward to the U.S.

American investors who buy Iranian Rial may be naive or unaware that the economic sanctions against Iran are still in force and legally prohibit them from buying or possessing IRRÖ

Yet, PayPal and other major corporations that should be savvy enough to understand financial regulations are openly ignoring the U.N. and U.S. government sanctions, while profiting from the booming online Rial trade.

Either U.S. government watchdogs havenít noticed that Americans are eager to buy Rial, or else theyíve decided to overlook PayPal and other corporate scofflaws as they continue to break the sanctions against Iran.

Why are these corporations, special? Others have been prosecuted for similar offenses Here is a list of some companies that have violated the sanctions.

1. Itís still illegal to buy Iranian Rial

Right now, the Iranian Rial is being sold widely even though itís illegal, even though as of August 2015, Americans cannot legally purchase IRR. Yet, U.S. authorities are overlooking these sales.

Until the sanctions are lifted or the authorities act to stop illegal currency sales, the booming U.S. black market in Rial will continue to thrive.

2. A long history of economic sanctions against Iran

Many governments and international agencies have imposed strong economic and financial sanctions against Iran over the years, and these sanctions are still supposed to be enforced. However, at least with regard to Americans who are eager to buy Iranian Rial, the sanctions are being overlooked.

The U.S. was the first nation to place sanctions on Iran after the Iranian Revolution in 1979, and has led the efforts in enforcing international restrictions ever since.

In 1995, before any serious concerns arose over nuclear proliferation, the U.S. government expanded its original import-export sanctions to prohibit companies from doing business with the Iranian government.

The U.S. has led an international effort to use economic and financial sanctions to influence Iranian policymakers.

U.S. policymakers want Iran to abandon its uranium enrichment projects, which the U.S. and other world powers fear might be used to produce nuclear weapons.

The United Nations Security Council has coordinated with the United States to enact a long list of sanctions against Iran over the years.

In 2006 the Security Council issued Resolution 1696which requested that the Iranian government stop its uranium enrichment activities.

Resolution 1737 was passed shortly thereafter, which changed the UNís effort from a request to a demand, and imposed sanctions against nuclear-related business activities. This regulation also froze the assets of certain key companies and individuals involved with the Iranian nuclear projects.

Those sanctions were followed by Resolution 1747 in 2007, which imposed an arms embargo, the freezing of Iranian assets and further prohibited financial dealings between Americans and Iranian businesses and organizations.

Following the UN action was Security Council Resolution 1803 in 2008. This extended the asset freezing even further and required states to monitor activities of Iranian banks and financial institutions.

Subsequent Resolutions strengthened the sanctions, including Resolution 1835 in 2008, Resolution 1929 in 2010 and Resolution 1984 in 2011. These additional sanctions were designed to further tighten the noose around the Iranian economy.

In 2012, the Security Council passed Resolution 2049, which extended the mandate period for the Iran Sanctions Committee for another year.

Beyond the U.S., the European Union and various other countries have imposed their own complementary sanctions against Iran, because of its nuclear development program.

In 2012, the EU agreed to impose an oil embargo against Iran, and freeze certain Iranian central bank assets on deposit in Europe.

In that same year, nearly all Iranian banks were disconnected from SWIFT, the worldís electronic inter-bank communications platform.

Australia and Canada also independently imposed financial restrictions and other sanctions against Iran.

These sanctions were all intended to strangle the Iranian economy and force the Iranian leadership to heed the demands of the U.S. government.

Yet, the sanctions are being ignored by those Americans who are eager to buy Iranian Rial.

3. Sanctions were meant to impact the Iranian Rial and the economy

From the beginning, the U.S. government and its allies designed the sanctions to have maximum impact on Iranís economy and currency. Story from Bloomberg Business.

The U.S. specifically targets the Iranian Revolutionary Guards and other governmental-business entities, which control much of Iranís national commerce.

As indicated earlier, at first the U.S. targeted the Iranian oil and petrochemical industries, including efforts to reduce oil exports. The restrictions were gradually expanded to impact the entire Iranian economy.

Over time the restrictions against interacting with the Iranian financial system have become nearly seamless in their coverage.

4. Here are the activities specifically outlawed under various provisions of often-overlapping sanctions-

  • Invest in Iran, which means buying the Iranian Rial
  • Deposit money or maintain money in the Iranian banking system, which includes Americans buying and holding the Rial
  • Import any goods or valuables from Iran, which happens when dealers sell the Rial to Americans
  • Facilitate any kind of trade with Iran, including buying Iranian products such as physical Rial currency

Logically, these successive layers of restrictions and sanctions apply to all forms of Iranian banking and financial transactions, including currency sales in which Americans buy Rial from dealers online or in person.

Read the other 5 sections by following the link below. -Loop