Our prize winning creation, on left.*

Last December, on “Giving Tuesday,” I encouraged friends and family to send donations to three of my favorite charitable causes in lieu of birthday presents: low-income housing, domestic violence, and Syrian refugee relief. My son and I had signed up to compete that week in the Habitat for Humanity Gingerbread Build (see our prize-winning creation in the photo!),* the Safe Passage 5K run, and a UMass benefit dinner for Syrian refugees being organized by the student Amnesty International chapter.

Safe Passage had an online portal for collecting donations, but for the two other organizations we collected money directly from neighbors, family and friends, and turned it in to the non-profits directly. And of course, since many of our family and friends don’t live in Amherst, we also used Paypal as a crowd-funding portal.

A few days later, one of my sisters received a sinister note from Paypal, demanding to know about the transaction labeled “for Syria.” (Paypal did not question any family members who sent donations through the site to support Habitat for Humanity.)

My sister answered all of Paypal’s questions politely and referred Lawrence, the Compliance Officer to me. I immediately explained to Paypal all the relevant information about my sister’s gift to me, and where the money had gone, mentioning not just the student organization at UMass but also the humanitarian organization, Jusoor Syria, a US-registered non-profit based in Michigan, to whom the student group had said they would pass our donation.

Nonetheless, Paypal has suspended my account and seized my sister’s $50 gift to me, pending my “cooperation” with their “investigation” into whether I may be “buying or selling goods or services that are regulated or prohibited by the U.S. government.” What they have said they want me to do is track down an official letter from Jusoor Syria, stating that I am authorized to collect money on their behalf (even though I was technically collecting money on my own behalf, and gave it to a student group, not to Jusoor Syria directly).

Currently, as documented over at Lawyers, Guns and Money, I am refusing to cooperate with this request – it seems unethical to demand that a humanitarian NGO divert its attention from assisting war-affected civilians to accommodate a policy that appears to be based on racial profiling, and I won’t be part of that. Instead I have asked Paypal to justify its intrusive behavior on the basis of some “reasonableness” criteria governing its right to review user transactions. To date, I have not yet received any kind of answer to my questions from Paypal’s Resolution Centre, nor has Dan Schulman, Paypal’s CEO, replied to my tweet.

Based on their official correspondence plus some online research, here is my best and most charitable sense of what is going on – all of which raises some very fascinating questions in terms of contract law, administrative law and national security law.

1. Beginning in May 2004, the US Government has imposed a series of sanctions on the government of Syria meant to address both human rights and global security dimensions of the Assad regime’s behavior. These sanctions including prohibitions on US citizens providing goods and services to entities within Syria. It’s fair to say that Paypal has obligations under this law to monitor how its users use its service.
2. The most recent version of this law prohibits transfers of money by US citizens to Syria or a Syrian entity without a specific license. US citizens are, however, allow to make donations to US NGOs or third-party NGOs assisting Syria. And indeed, according to the OFAC website, “U.S. depository institutions, including banks, and U.S.-registered money transmitters, are allowed to process transfers of funds to or from Syria on behalf of U.S. NGOs and third-country NGOs in support of the not-for-profit activities described in OFAC General License No. 11.*” Therefore, as far as I can tell, the main thing that Paypal needs to determine in order to know whether or not I, or any user, or Paypal itself, is in compliance with OFAC regulations is whether or not the money is going to a non-Syrian-based entity. Since I explained to Paypal in my very first reply that the organization in question was US-based, it is unclear why that did not resolve the issue.
3. The Paypal transaction in question was a birthday gift from my sister to me, and not to any NGO. However I did later make a donation to a student group, who themselves were crowd-sourcing donations to a Michigan-based US nonprofit, Jusoor Syria (which is exactly what all benefit organizers do).  One interesting question is whether Paypal’s user policy permits it to police Paypal transactions only or also any following use of the money received through those transactions, and how many steps in that chain constitute a legitimate jurisdiction for its corporate oversight activities.
4. Paypal’s User Agreement allows it to review what it considers “in its reasonable discretion” to be high-risk payments, including those where it harbors a “reasonable suspicion” that such a payment is being used in relation to “restricted activities,” and to put holds on those payments for up to 180 days while it reviews them.
5. Restricted Activities include (quite reasonably in my view) “breach of any law, statute, contract or legislation.” However the User Agreement does not specify on what basis Paypal might reasonably accuse a user of such breach, or how a user is to exonerate themselves from such a claim in order to retain access to services, or what might constitute abuse of such a process. Apparently reading the OFAC statute, and providing evidence to Paypal that the transaction in question would not fall within it as a “restricted activity,” is insufficient to resolve the matter in the eyes of Paypal.
6. Based on this experience and that of others, Paypal appears to be using filters to flag any transactions to do with “Syria” and then suspends user accounts pending further specific bureaucratic efforts to show they are not illegal – in this case the submission of a document from the charity itself authorizing the user to make a donation – even when the recipient is a US-registered or other well-recognized charity, and when the Paypal user therefore has every right to make such a donation unimpeded. This may be a well-intentioned effort to comply with national security law, but in my view it also puts an undue burden on users and disincentivizes efforts to crowd-source humanitarian relief for refugees. I am investigating whether it might violate civil liberties of Paypal users as well as international humanitarian standards as well.

Without further information from Paypal on its policy, it is hard to determine whether or not its actions are indeed reasonable or constitute an undue burden on its users – and on the recipients of its users’ generosity, who have better things to do (namely refugee relief) than cater to Paypal’s bureaucratic demands. For now, in the context of a massive humanitarian crisis and grossly underserved refugee population, it is fair to say that this behavior seems uncharitable at best. Sanctions against Syria were meant to prohibit transfers to the Assad regime and its supporters, not to penalize US citizens for assisting Syrian victims of that regime’s brutal policies.

What we have here, it seems to me, is a corporation governing the humanitarian impulses of private citizens in a way that disincentivizes pro-normative behavior. I’m not sure what the appropriate ethical or legal response is to such acts, but my best course of action right now would appear to be civil disobedience of Paypal’s User Agreement, which technically requires me to “cooperate” with Paypal’s “investigation” in a manner which would pose an undue bureaucratic burden on a humanitarian organization now occupied with a massive crisis.

So that’s where that stands. It is certainly an interesting case study of transnational “governance.”

Thoughts?

*Liam’s team  also won a prize for “Most Donations Collected” for Habitat for Humanity. Paypal did not harrass us for our Habitat fundraising, but they did block my account for a separate fundraiser for Syrian refugees.