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PayPal’s anti-terrorism regulations are causing headaches for average businesses



All my editor was trying to do was pay me for an article on the Iran-Contra scandal. But when they sent me the money through PayPal, it got held up for 24 hours to comply with government regulations.

We think it was because of the phrase Iran Contra in the comments, referring to the governments illegal support of Nicaraguan counterrevolutionaries using money from arms deals with Iran, the subject of the article.


Its possible PayPal wont literally let you pay for arms to the Contras. But its more likely Iran was the real trigger.

However, all this is pure speculation because PayPal presented no further explanation about why the transaction was held up between my editor and me, both of us who had conducted business in the past.

This seemingly unusual situation was not that uncommon, it turns out.

While many people use PayPal and other online payment systems, few may realize that these companies are required to scrutinize transactions to comply with government regulations against terrorism and money laundering.


But this compliance can result in payments being delayed for further review when people use certain words in their transactions, like Cuba or Damascus, which can take hours, days, and even weeks to resolve.

More troubling is the fact that Arabic words or words relating to the Muslim faith are causing transactions to get held up as well.

. . .

PayPal is an incredibly popular online payment system used by people across the world to pay for goods and services or pay friends and family back.

As of June 30, PayPal reported it has 286 million users. In 2018, the company processed 9.9 billion transactions. PayPal also owns Venmo which has 40 million users each year making at least one transaction.

However, with that volume of accounts and transactions, PayPal is required to comply with government regulations to prevent money laundering and support of terrorism. In September 2019, Reuters reported that the Australian finance intelligence agency, Australian Transaction Reports and Analysis Centre (AUSTRAC), believed that PayPal was not complying with these regulations and thus ordered an audit of their activities.

For the audit, PayPal is required to hire an external accountant to review 120 days of transactions.

An ABCarticle notes, AUSTRAC singled out child sex exploitation as a risk that prompted the regulatory intervention.

But child sex trafficking is just one of many issues that regulators in the U.S., Australia, and other governments are worried about.

PayPal has been slapped with fines for its failure to comply with U.S. government regulations.

In 2015, PayPal agreed to pay $7.7 million to the Treasury Department for violating sanctions by conducting business with restricted countries like Cuba and Syria. Reuters notes that PayPal did not adequately screen its transactions for U.S. sanctions targets for several years through 2013 and the platform processed $7,000 worth of payments for Kursud Zafer Cire, a Turkish national on the sanctions blacklist tied to proliferators of weapons of mass destruction,

PayPals User Agreement states, We may place a hold on payments sent to your PayPal account if, in our sole discretion, we believe that there may be a high level of risk associated with you, your PayPal account, or your transactions or that placing such a hold is necessary to comply with state or federal regulatory requirements. We make decisions about whether to place a payment hold based on a number of factors, including information available to us from both internal sources and third parties.

PayPal also has a list of prohibited countries where transactions are automatically denied when originating from and works to comply with the Office of Foreign Assets Control.

While these regulations make sense to fight money laundering and the funding of terrorism, the system has many false positives that impact peoples livelihoods and bank accounts. While PayPal claims it uses many factors, one clear factor is what payees put in the optional section to add a note.

Venmo requires users to include a note explaining the nature of their transactions.

One common complaint is that putting the names of certain countries who have historically problematic relationships with the U.S. can get held up. Notably, Cuba.

People on message boards have sad any use of Cuba, including as payment for an article or for Cuban food, has caused transactions to be held up.

As an experiment, I made a small transaction to pay a relative back and used the phrase Cuba bill. When I pressed Send Payment Now, I immediately received a message: Your payment is being reviewed because of regulations with a note that it usually would be resolved within 72 hours.

My relative also received notice that the payment was being delayed.

Two days later, I received another email that I was required to provide additional information:

  • An explanation of the reference to Cuba.
  • The purpose of this payment, including a complete and detailed explanation of what is intended to be paid for.

I explained that the nature of the bill and explained my curiosity about using the phrase Cuba. Logging into my account, I discovered that a restriction had been placed on itI was not permitted to close the account.

A few days later, my relative also received a similar message asking about the exact nature of the transaction and an explanation of the use of Cuba. After eight days, the transaction was finally cleared and released to my relative. There was no further information about the transaction or whether the responses were accepted, except that the transaction was released to my relative and the restriction was taken off.

While this has been a mildly annoying experience, it can have more serious impacts on peoples livelihood.

For instance, Kate Sloan, a freelance writer who specializes in sex and relationship, has had problems with PayPal over the content of her work.

Articles cover topics from advice from sex workers to discussing the ethics of applications that allow women to rate their lovers. She explained that her account was permanently limited for violating their acceptable use policy. She said, When I looked into what that policy says, I assumed the sexual nature of my writing was what had gotten me into trouble.

A week after Sloan reached out on email and social media, PayPal found that it didnt violate the acceptable use policy after all. But it happened again with a second account, which PayPal reinstated a few weeks later. For Sloan, these incidents were problematic for her business because PayPal was an important way to get paid for her work.

The Stop Enabling Sex Traffickers Act (SESTA) and Allow States and Victims to Fight Online Sex Trafficking Act (FOSTA) may have played a role in Sloans account suspension; she said that she had not had issues prior to April 2018 when the law was passed.But she notes that other sex writers had issues with PayPal before the laws were passed.

In another even more concerning instance, PayPals system is picking up any Arabic words or any words relating to the Muslim faith.

Mallorie Dunn, owner and designer of SmartGlamour, has been using PayPal for her business for five years, selling customizable dresses, each named after a woman she admired. On dress was named for Isra Hirsi, Minnesota congresswoman Rep. Ilhan Omars (D-Minn.) daughter, who co-founded the U.S. Youth Climate Strike. The name means Night Journey in Arabic.

Earlier this year, Dunns sister wanted to purchase a dress and sent a direct link through PayPal with the name of the dress in the note line. However, the payment was immediately held up. It was the first time in five years that this had happened to her; it was for her sister, who she had regularly done transactions with.

Normally, PayPal transactions are processed through her website so the product information is not provided to PayPal. Since she was conducting the transaction directly through PayPal with her sister, this issue arose.

Dunn did some research and discovered message boards noting how words like Syria, Damascus, and Arabic words could cause payments to be held up.

Like my own experience with my Cuba bill transaction, she and her sister both had to respond to questions about the transaction. The money was released within a week with no further explanation. She fully expects it to happen again if anyone writes Isra or other Arabic names in the note line.

When asked how she felt about the situation,she was frustrated, saying that PayPal was assuming anyone with the name Isra is clearly tied to some kind of terrorism and this is why this is being held up. This is absolutely ridiculous. It was definitely frustrating, and very clearly an Islamophobic situation.

Even related words in transactions have caused transactions to get held up. People on PayPals message boards have reported transactions with words like muslin, a fabric type, or Persian ink have been flagged.

PayPals user agreement notes that multiple reasons can hold up a transaction. Since PayPal provides little explanation beyond government regulations, its possible that these examples may have resulted from other unknown factors. But since these transactions were between people who had previously used PayPal and both parties were in the U.S., its unlikely that the location of the transactions and the identity of the parties were a factor.

But the more troubling aspect to all of this is that words from the Arabic world and related to Islam, such as Damascus, Persian ink or Abdul, get picked up and held for review. This may cause annoying issues that I have experienced or it may result in accounts being frozen or closed for using someones name.

How is PayPal doing this? And how is it picking up so many words? Since PayPal has not responded to repeated requests for information, we can only surmise on the companys methodology. Given the volume of transactions processed each day, the tracking of hot words might be done by an algorithm, rather than a person individually flagging words.

Algorithms can automatically flag pre-specified words and classes of words, explains Natalie Jorion, PhD, who researches machine learning applications. Some algorithms are now able to group similar words together, like cat and dog. This grouping would help explain how Muslim-sounding words can trigger a reviewed transaction.

Or it might be even simpler than that. It could be a system with keywords that can be easily updated, explains Os Keyes, Ph.D. student and researcher at the University of Washington. A system can be set up that checks PayPal notes for certain words on a list and if there is a match, then certain actions, like flagging a transaction, occur. However, this means that surnames that match critical words, like Cuba, or potentially partial phrases will also have issues with the system.

Regardless of how PayPal managed to flag these transactions, its a frustrating process for everyone who has transactions delayed and possibly even denied. Little information is provided beyond the opaque explanation that transactions are reviewed to comply with government regulations.

So be careful what you put into the notes section of a PayPal transaction. It may result in some unnecessary headaches.



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Europe might ban facial recognition in public spaces for up to 5 years




Facial recognition tech in the EU might have to wait 3-5 years, at least when it comes to public spaces.
Facial recognition tech in the EU might have to wait 3-5 years, at least when it comes to public spaces.
Image: istock / Getty Images

Facial recognition technology may soon be banned in the public spaces of the European Union. 

The European Commission is considering a temporary ban, lasting 3-5 years, on such technology in public spaces, for private and public organizations alike. This is according to a draft white paper on artificial intelligence, obtained by Euractiv and Politico.

According to the document, the purpose of the ban is to identify and develop “a sound methodology for assessing the impacts of this technology and possible risk management measures.”

The reasoning for the ban on facial recognition stems from the EU’s General Data Protection Regulation, which states that citizens should have “the right not to be subject of a decision based solely on automated processing, including profiling, which produces legal effects concerning him or her or similarly significantly affects him or her.”

The EU has long been wary of AI technology advancing too soon, to the detriment of its citizens’ privacy. If the new draft is implemented as a regulation, certain EU countries will have to halt plans for implementing AI-enhanced surveillance. This includes Germany’s plan to place AI-enhanced surveillance cameras at train stations and other public locations, as well as similar initiatives in Spain and France

According to The Guardian, UK police are considering facial recognition software, and legislation like the above ban was used an argument to leave the EU by Brexit supporters.

The white paper’s completed version should be published in late February, Euractiv claims. 


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Xiaomi spins off POCO as an independent company




Xiaomi said today it is spinning off POCO, a sub-smartphone brand it created in 2018, as a standalone company that will now run independently of the Chinese electronics giant and make its own market strategy.

The move comes months after a top POCO executive — Jai Mani — and some other founding and core members left the sub-brand. The company today insisted that POCO F1, the only smartphone to be launched under POCO brand, remains a “successful” handset. The POCO F1, a $300 smartphone, was launched in 50 markets.

Manu Kumar Jain, VP of Xiaomi, said POCO has grown into its own identity in a short span of time. “POCO F1 is an extremely popular phone across user groups, and remains a top contender in its category even in 2020. We feel the time is right to let POCO operate on its own now, which is why we’re excited to announce that POCO will spin off as an independent brand,” he said in a statement.

Xiaomi created POCO brand to launch high-end, premium smartphones that would compete directly with flagship smartphones of OnePlus and Samsung. In an interview with yours truly in 2018, Alvin Tse, the head of POCO, and Mani, had said that they are working on a number of smartphones and also thinking about other gadget categories.

At the time, the company already had 300 people working on POCO, and they “shared resources” with the parent company.

“The hope is that we can open up this new consumer need …. If we can offer them something compelling enough at a price point that they have never imagined before, suddenly a lot of people will show interest in availing the top technologies,” Tse said in that interview.

In the years since, Xiaomi, which is known to produce low-end and mid-range smartphones, itself launched a number of high-end smartphones such as the K20 Pro. Indeed, earlier this week, Xiaomi announced it was planning to launch a number of premium smartphones in India, its most important market and where it is the top handset vendor.

“These launches will be across categories which we think will help ‘Mi’ maintain consumer interest in 2020. We also intend to bring the premium smartphones from the Mi line-up, which has recorded a substantial interest since we entered the market,” said Raghu Reddy, Head of Categories, Xiaomi India.

It is unclear, however, why the company never launched more smartphones under POCO brand — despite the claimed success.

As we noted in our recent Xiaomi’s earnings coverage, the Chinese electronics giant is struggling to expand its internet services business. Xiaomi posted Q3 revenue of 53.7 billion yuan, or $7.65 billion, up 3.3% from 51.95 billion yuan ($7.39 billion) revenue it reported in Q2 and 5.5% rise since Q3 2018. 

On top of that, the smartphone business revenue of Xiaomi, which went public in 2018, stood at 32.3 billion yuan ($4.6 billion) in Q3 last year, down 7.8% year-over-year. The company, which shipped 32.1 million smartphone units during the period, blamed “downturn” in China’s smartphone market for the decline.

More to follow…


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‘PigeonBot’ brings flying robots closer to real birds




Try as they might, even the most advanced roboticists on Earth struggle to recreate the effortless elegance and efficiency with which birds fly through the air. The “PigeonBot” from Stanford researchers takes a step toward changing that by investigating and demonstrating the unique qualities of feathered flight.

On a superficial level, PigeonBot looks a bit, shall we say, like a school project. But a lot of thought went into this rather haphazard-looking contraption. Turns out the way birds fly is really not very well understood, as the relationship between the dynamic wing shape and positions of individual feathers are super complex.

Mechanical engineering professor David Lentink challenged some of his graduate students to “dissect the biomechanics of the avian wing morphing mechanism and embody these insights in a morphing biohybrid robot that features real flight feathers,” taking as their model the common pigeon — the resilience of which Lentink admires.

As he explains in an interview with the journal Science:

The first Ph.D.student, Amanda Stowers, analyzed the skeletal motion and determined we only needed to emulate the wrist and finger motion in our robot to actuate all 20 primary and 20 secondary flight feathers. The second student, Laura Matloff,uncovered how the feathers moved via a simple linear response to skeletal movement. The robotic insight here is that a bird wing is a gigantic underactuated system in which a bird doesn’t have to constantly actuate each feather individually. Instead, all the feathers follow wrist and finger motion automatically via the elastic ligament that connects the feathers to the skeleton. It’s an ingenious system that greatly simplifies feather position control.

In addition to finding that the individual control of feathers is more automatic than manual, the team found that tiny microstructures on the feathers form a sort of one-way Velcro-type material that keeps them forming a continuous surface rather than a bunch of disconnected ones. These and other findings were published in Science, while the robot itself, devised by “the third student,” Eric Chang, is described in Science Robotics.

Using 40 actual pigeon feathers and a super-light frame, Chang and the team made a simple flying machine that doesn’t derive lift from its feathers — it has a propeller on the front — but uses them to steer and maneuver using the same type of flexion and morphing as the birds themselves do when gliding.

Studying the biology of the wing itself, then observing and adjusting the PigeonBot systems, the team found that the bird (and bot) used its “wrist” when the wing was partly retracted, and “fingers” when extended, to control flight. But it’s done in a highly elegant fashion that minimizes the thought and the mechanisms required.

PigeonBot’s wing. You can see that the feathers are joined by elastic connections so moving one moves others.

It’s the kind of thing that could inform improved wing design for aircraft, which currently rely in many ways on principles established more than a century ago. Passenger jets, of course, don’t need to dive or roll on short notice, but drones and other small craft might find the ability extremely useful.

“The underactuated morphing wing principles presented here may inspire more economical and simpler morphing wing designs for aircraft and robots with more degrees of freedom than previously considered,” write the researchers in the Science Robotics paper.

Up next for the team is observation of more bird species to see if these techniques are shared with others. Lentink is working on a tail to match the wings, and separately on a new bio-inspired robot inspired by falcons, which could potentially have legs and claws as well. “I have many ideas,” he admitted.


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