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Being a small business is hard enough. Like most small businesses, we do whatever we can to encourage clients to pay their accounts in a convenient form.

Cheques are fast becoming outdated. Cash payments are rare too. Business clients are increasingly relying on electronic payment facilities in their day-to-day accounting procedures.

Mums and dads though are favouring online payment portals like Paypal. I do not have an issue with that. Paypal is painless, gives good reporting and is a safe transaction in most cases.

I do have an issue with their resolution 'skills' though. As many nightmares come out of the dispute process as there are successful conclusions, but that is perhaps the subject of another article.

What a great way to keep people’s cash under the guise of ‘anti-money laundering’.
The problem, I think, lies with their monopoly of the system. No competition really is a bad thing. The added negative is that they are owned by eBay, in itself cause for concern, given its history of trading and payment anomalies.

Recently I had my 'PayPal verified' business account frozen. Clients can still pay into my PayPal account, but I was frozen from transferring the funds to my cheque account, stopped from paying my own suppliers with PayPal money, and held to ransom by the monster that has become the PayPal entity.

Their reasons?

We are required by Australian anti-money laundering laws to confirm your identity once your PayPal account balance reaches $1000.

Please help us confirm your identity by providing some information about yourself.

We are writing to you because your PayPal account balance has reached a balance of $1,000.00 AUD and a partial limitation has been placed on your account in accordance with Australian Anti-Money Laundering & Counter Terrorism Financing laws. This means that while you can continue to receive payments, you are unable to withdraw funds or make payments until we have verified your identity.

What should I do?
1. Login to your PayPal account.
2. Click on 'Resolution Centre' and complete the steps listed.

Once all the steps have been completed and our agents have been able to confirm your identity, the limitation on your account will be lifted within 2-3 business days and full access will be restored to your account.

This requirement came in on April 6th, 2011, the same day I was notified.
The problem I had is that, 3 days later, my account was still frozen, and the resolution centre kept telling me there was no problem with my account.

Every time I wrote to Paypal to see what was going on, I got the standard reply - check the resolution centre. I decided to ring them in America. Guess what. They told me to check out the resolution centre and follow the prompts. WHAT PROMPTS!

I decided to write to them and highlight some of their, shall we say, shortcomings in the overall 'competency' scale of 1 to 10.

I immediately had an email back telling me what I needed to do to unfreeze my account. It reads like, coincidently, a laundry list.

Your business PayPal account was limited and the steps below help you lift this limit so that you can continue running your business

To verify your business details we need to:
•    collect Business documents
•    verify the Verifying Officer

Please note the information on your documentation must correspond with the information registered on your PayPal account.

For Incorporated Associations we require:

Certificate of Incorporation issued upon registration. Note: This must contain the Unique Identification Number of the Association.  Additionally, we also require one of the following:

(1) Notice issued by the Australian Taxation Office advising the tax concession status of the

(a) Non-profit organisation;
(b) or Constitution
(c) or Rules of the Association

(2) A bank statement in the name of your organisation for the bank account attached to the PayPal account

(3) Schedule of Details of Primary Contact and all office bearers (e.g. President, Vice-President, Secretary, Treasurer, and Public Officer)

(4) A Letter of Appointment for the Verifying Officer signed by the Chairperson, Secretary or Treasurer

(5) An Authorisation Letter signed by the Verifying Officer nominating all additional person(s) accessing the PayPal account

A document is also required to verify the Verifying Officer. This includes one document to confirm Verifying Officer’s Name, a separate document to confirm Verifying Officers Date of Birth and a 3rd document to confirm Verifying Officers Residential Address. It must not be the same document for all three verifications.

I was also reminded that a “Verifying Officer” is the Primary Contact/Business Owner whose details were provided on sign up and that a Verifying Officer cannot sign the Letter of Appointment.

Documentation provided had to be valid, legible, scanned in colour (if possible) and actual original size.

I wrote back complaining that these documents did not apply to my business. I got a reply a few days later. It appears that I was sent the wrong request. This laundry list was much shorter.

For all company types we require the following documents:

1. A Letter of Appointment for the Verifying Officer signed by a Director or the Company Secretary

2. An Authorisation Letter signed by the Verifying Officer nominating all additional person(s) who have access to the PayPal account using their own individual Login details

3. Documents to confirm the identity of the Verifying Officer or Sole Director if applicable

For Sole Director Companies where the only authorised account operator is also the sole director and shareholder of the Company, an Annual Company Statement should be provided.

For an Unlisted Public Company or Proprietary Company we also require one
of the following business documents:

(a) Certificate of Incorporation, also known as Certificate of Registration
(b) Certificate of change of name (if applicable)

To verify the Verifying Officer we require:
1. One document to confirm Verifying Officer’s Name and Date of Birth
2. One document to prove the Verifying Officer’s Residential Address

Faxes to PayPal can be sent to: 02-8288-0037

You may also mail the information to: PayPal,

Attention: Compliance
P.O. Box 45950
Omaha, NE 68145
United States

Once we receive and review your documentation, we will notify you via email regarding the status of your account.

On the Paypal website, they say very clearly that the request for information cannot be appealed
I initially posted my thoughts on my blog to gauge my reader’s reactions. I got a fair few private responses with many small businesses experiencing the same issue.

I received this from Alisa ……

Don’t get me started. I took up a collection for someone who lost everything in the floods in QLD. A whole $700 odd.

I put a Donation button on a closed email to a collection of crafting ladies. They then kicked in a couple of bucks each.

If you have a PayPal account, I would suggest you keep your balance well below $999 so you do not trigger the new laws.
PayPal took me to task, accused me of all sorts of things and the documentation I had to provide was endless. I also had to refund back all of the donations and was charged a refund fee by PayPal. They also froze my website from making any sales. This dragged on for 3 weeks. Eventually after many sleepless nights worrying that I’d committed some sort of crime, I contacted the relevant Australian authorities about this issue. Each one confirmed that as my donation collection was under $10,000 and was a goodwill exercise, they weren’t remotely interested as long as I had documented evidence of who paid what.

Sadly PayPal didn’t agree with the Australian authorities.

I gave up eventually and started a new account. Guess what, I’ve just tipped $1000 and again my account is restricted and like you, I have to produce all sorts of docs. As far as I can tell, I’ve provided everything they have asked for, but still my account is frozen.

What a great way to keep people’s cash under the guise of ‘anti-money laundering’.

I do not really think it is different to what a bank requires when opening a business account.

The point is though it is NOT a bank. Paypal is no different to a company like Western Union transferring my money to a friend overseas.

The fact is: I have no idea who will have access to my documents once they are sent. I have no idea what will happen to these documents once they have been sighted. I do not even have a face or a full name to the person that will be responsible for the safe passage of my personal information. I cannot get a signature from anyone to say they accept them. I cannot hold anyone responsible if my details are sold or leaked to illegal activity.

What are my options?

On the Paypal website, they say very clearly that the request for information cannot be appealed. Effectively, I am held to ransom. If I want my money released, I must conform. They kindly give me 45 days to act on the request, and if no documents are forthcoming, my account is frozen and I have no access to my funds.

If you have a PayPal account, I would suggest you keep your balance well below $999 so you do not trigger the new laws.

I do not actually have an issue with the authorities attempting to limit tax dodging or illegal activity, but in their mindless blind panic to plug perceived laundering loopholes, and perhaps catch the odd thief, they are creating a bigger problem by exposing the legitimate businesses that use Paypal to fraud on a much larger scale.

Still, we assume that bureaucrats and politicians have some level of common sense, but that is another discussion at another time I guess.

Shane Drew