Dive Brief:

• A House committee is asking PayPal Holdings to explain its anti-money laundering policies, risk assessments and communications with China’s Tencent Holdings as part of its recent partnerships with Tenpay Global, Tencent’s cross-border payment platform.
• The U.S. House Select Committee on the Chinese Communist Party wrote Friday in a letter to PayPal CEO Alex Chriss that the company’s integrations with Tencent “risk converting a coordination platform for criminal networks into a direct payment rail — eliminating the natural friction between planning and execution and allowing illicit actors to bypass Know Your Customer (KYC) and other AML safeguards.”
• A PayPal spokesperson said Monday via email that the company works “to combat and prevent the use of our services and platform for any illicit use, including money laundering and other financial crimes. We take this commitment seriously and devote significant resources globally to financial crime compliance.”

Dive Insight:

The agreements for payments to and from China, first announced in April, allow PayPal users to send funds to Tenpay’s Weixin Pay and linked bank accounts in China and to make purchases in China.

“Given that Weixin Pay can be used by Chinese Money Laundering Organizations (CMLOs) to coordinate illicit finance, we seek information and assurances that PayPal’s new partnerships will not enable CMLOs to shift from merely using Weixin Pay to organize illicit activity into actually moving illicit funds directly through PayPal–Weixin Pay channels,” wrote committee Chairman John Moolenaar, a Michigan Republican, and Rep. Raja Krishnamoorthi, a Democrat from Illinois and the committee’s ranking member.

“U.S. authorities have repeatedly identified Weixin Pay as a central hub for CMLOs, including those tied to fentanyl trafficking,” said the letter, which the committee released Monday.

As a money transmitter, San Jose, California-based PayPal must comply with the Bank Secrecy Act as the company is registered with the Financial Crimes Enforcement Network, the letter said. 

As a result, PayPal must “maintain a risk-based anti-money laundering program with clear procedures for customer identification, ongoing monitoring, recordkeeping, and the filing of Suspicious Activity Reports,” the committee said in its letter.

The select committee wants “all agreements, amendments and supplemental records” between the companies about the Weixin Pay integrations, “including drafts and negotiations.” 

It also requested PayPal’s suspicious activity alerts and reports to the crime network since January 2023; audits of PayPal’s Tencent-related AML programs; AML risk assessments; and organizational charts of executives responsible for AML compliance and cross-border oversight.

The committee told PayPal to furnish its responses by Oct. 3.