The financial company PayPal, founded by a native of Kyiv, Max Levchin, became fully operational in Ukraine on March 17, 2022. Thus, the company decided to support the Ukrainians, who, on the one hand, were fleeing a full-scale war, and on the other, were collecting donations to buy everything they needed for the front.
The financial company PayPal, founded by a native of Kyiv, Max Levchin, became fully operational in Ukraine on March 17, 2022. Thus, the company decided to support the Ukrainians, who, on the one hand, were fleeing a full-scale war, and on the other, were collecting donations to buy everything they needed for the front.
Before that, the service in Ukraine was available in send only mode. This mode allows you to create an account, top it up with a bank card and pay in online stores. However, receiving or transferring money is not. Instant transfers between users are the greatest value of the service, which operates in more than 200 markets around the world and has more than 426 million customers.
Many people call the day of the full-fledged launch of PayPal in Ukraine historic. After all, this took decades, changes in domestic legislation and diplomatic efforts.
However, Ukrainian PayPal users, both before and after the full launch, continue to face a common problem - account blocking and money freezing. Moreover, PayPal does not send any notifications or warnings.
Volunteers, military personnel who open collections into personal accounts, and drone manufacturers suffer the most from this. And this is not a technical failure, but a purposeful policy of the company, which is rather vaguely described in the rules for using the service.
Thus, in July 2024, the Polish antitrust regulator (UOKiK) imposed a fine of $27.3 million on PayPal Europe because the company did not clearly indicate in its contracts with users the conditions under which they could be fined.
“PayPal's provisions are general, ambiguous and unclear. By reading these provisions, the consumer cannot predict which of his actions may be considered prohibited or what sanctions may be applied to him. Thus, PayPal has the unlimited ability to decide at its own discretion whether the user has committed a prohibited action and what punishment he faces for this, which could be, for example, blocking money in the account,” says UOKiK’s position.
Recently, another wave of account blocking occurred in the Ukrainian PayPal segment. Among them was the domestic drone manufacturer Wild Hornets.
“We are not the only Ukrainian fundraisers who have been blocked recently. This is outrageous. We urge the company to reconsider its policies and decisions to ensure that it supports Ukraine and does not side with terrorist invaders,” the Wild Hornets statement said.
PayPal ceased its operations in Russia back in March 2022, in parallel with its launch in Ukraine. Although it will not be possible to create new accounts from the Russian Federation, the company continues to service existing accounts.
However, from October 7, 2024, PayPal began charging an annual commission from Russians if the account was not used or replenished during the year. The commission is 3.5 thousand rubles. (~$35). If the user does not agree to such conditions, he must withdraw funds and close the account, but if the account has less than the required amount, PayPal writes off the entire balance.
With such actions, the company seems to show that it is on the right side of the barricades, but this does not make the problems of Ukrainian users disappear. The situation with the Wild Hornets is another example of this.
BusinessCensor figured out why PayPal blocks accounts of Ukrainians.
For personal use only
PayPal offers several types of accounts: personal, corporate, and for charity. But only personal accounts are available to Ukrainians. The company calls its work in Ukraine humanitarian aid, so from the very moment of its launch in our country there was no talk about business accounts.
As noted on the official PayPal website, users from Ukraine can send and receive payments from friends and family. In order to receive payment for goods or services, as well as to raise funds, in accordance with the general rules of the service, you must use a corporate account. That is, fees that Ukrainians open for personal accounts may be regarded by PayPal as a violation and the accounts may be blocked.
Moreover, it is not so easy to get money even from friends and relatives.
A soldier I know, who asked that his name not be used, told BusinessCensor that a friend recently sent him 2,000 euros from Germany to buy a car needed to carry out combat missions. But PayPal blocked the money without any notice. I had to issue a refund and lose on the commission. The required amount was eventually transferred through cards of Ukrainian banks.
“Under certain circumstances, to protect PayPal and the security and integrity of the network of buyers and sellers who use PayPal's services, the company may take action at the account level or at the transaction level. Our decisions about retentions, limits and reserves may be based on confidential criteria that are important to our risk management and the protection of PayPal, our customers and/or service providers. We may use proprietary risk and fraud modeling to assess the risk associated with your PayPal account. In addition, we may be limited by regulations or government authorities in disclosing certain information about such decisions. We are not required to disclose details of our risk management or security procedures,” PayPal's user agreement states.
New old problems
Ukrainians began to complain about the blocking of accounts and money in their accounts literally as soon as PayPal expanded its functionality in Ukraine in 2022. The system then selectively froze funds in the accounts of Ukrainians for a period of 30 to 180 days. That is, for up to six months, users could neither view their account status nor withdraw or transfer money to someone else.
Contacting support did not yield anything other than a standard unsubscribe.
“For security reasons, we are not disclosing the details of the breach as this would circumvent our security measures. We conduct a thorough investigation before making such a decision, so this is a final decision that will not be reversed,” PayPal responded to numerous requests.
More than two years have passed since then, but the situation has not changed. Any account or transaction may be blocked without any reason or notice from PayPal. This is what happened to the Wild Hornets, or our military friend, or hundreds of other users of the service.
It must be understood here that PayPal is a global financial institution that, among other things, is required to comply with all applicable laws and regulations to combat money laundering (AML - Anti-money laundering) and the financing of terrorism.
PayPal has been owned since 2002 by eBay, headquartered in San Jose, California. Therefore, first of all, PayPal will comply with the requirements of American legislation and other regulations, especially regarding AML.
The United States, which has been systematically dealing with the problem of money laundering and terrorist financing since the 70s of the last century, is, in fact, an international AML standard, a global legislator in this area.
Ukrainians are accustomed to financial freedom, which does not fit into American ideas of regulation and control. Instant money transfers from card to card or by phone number (P2P transfers) are quite commonplace for Ukraine, but not for Europe or, especially, the USA, where each operation is carefully examined by the relevant structures and internal financial monitoring services.
That is why the National Bank of Ukraine has recently strengthened the position of financial institutions, requiring even non-bank financial institutions to implement a strict AML policy. Simply put, the NBU takes full control over the remittances of Ukrainians, which we wrote about in detail in this article.
AML verification is not limited to the banking sector or e-wallets. Even cryptocurrency exchanges must carry it out. One of the main canons of Anti-money laundering is the Know Your Customer (KYC) principle. That is, any financial service, including cryptocurrency ones, must know everything about its client - from name, postal code and passport data to official monthly income. Any profile deviations are a guaranteed ticket to blocking and then additional verification.
Financial monitoring services, both abroad and in Ukraine, are perhaps united by one detail - they keep the algorithms and methods of their work secret. Moreover, they are constantly changing so that it is impossible to adapt to them.
In fact, this is what PayPal writes about in its user agreement or replies to user complaints: “We are not obligated to disclose details of our risk management or security procedures.”
High danger region
Due to the fact that Ukraine has been at war for more than ten years, two of which were full-scale, our country is considered a region of increased danger. The biggest stumbling block in the work of international financial and other services is the temporarily occupied territories, especially those that were occupied before February 24, 2022.
The same IDPs from Donbass, after the start of a full-scale war, have problems adding bank cards to Apple Wallet or Google wallet. They have to go through additional verification procedures, creating appropriate applications and providing piles of documents.
Simply put, the central offices of certain companies (especially financial ones) do not know what to do with users from the same Crimea, which has been de facto annexed by Russia since 2014, but de jure is part of the internationally recognized borders of Ukraine. Giving, for example, Crimeans unlimited access to financial services can be regarded as financing terrorism, since international sanctions were once applied to the territory of the peninsula.
American and international regulators are quite strict in such matters, so no company will be at risk of fines or any other penalties. Considering that the share of the Ukrainian market on a global scale is small for an unjustified risk.
A striking example is the American crowdfunding company Buy Me a Coffee, which in our country became an alternative to Patreon after the scandal with blocking the account of the “Turn Around Alive” foundation with $250 thousand in donations and blocking the account of blogger and volunteer Sergei Sternenko in early 2023, refused in August 2024 - to provide a full-fledged service for users from Ukraine.
Buy Me a Coffee simply blocked the possibility of withdrawing money to cards of Ukrainian banks.
“Since approximately 20% of the territory of Ukraine is subject to sanctions, it has become extremely difficult to accurately verify and control locations, which creates significant risks of errors,” the service’s technical support explained then, sincerely apologizing for any inconvenience.
That is, it is easier for the service to completely refuse to serve users from Ukraine than to be subject to possible financial sanctions from American, European or international regulators.
As noted above, PayPal positions its work in Ukraine as humanitarian aid. As noted on the company’s official website, changes in services and fees (fees have been canceled for Ukrainians) will apply until December 31, 2024. Further - at the discretion of the company.
Considering the uncertainty of the military-political situation in Ukraine, BusinessCensor does not recommend that Ukrainians keep significant amounts in PayPal wallets or other international financial services, including cryptocurrency ones. After all, they can be blocked at any time without any notification or explanation. “Wild Hornets” managed to withdraw the bulk of the money the day before the account was blocked. Pure luck.
Resume
Anti-Ukrainian hysteria in the United States will grow at least until the presidential elections on November 5. Consequently, depending on who will be seated in the Oval Office, further policies will be formed regarding users of certain, in particular, financial services from Ukraine.
There is no need to count on concessions. The United States overcame the ban on the supply of lethal weapons only in 2018. Faster than the obstacles to PayPal operating in Ukraine. After all, war is war, and cash flows must be under the control of corporations, of which PayPal is a part.
