As part of a settlement between the United States Treasury Department and PayPal, the e-commerce company has agreed to pay $7.7 million over alleged sanction violations.
The alleged violations included PayPal not adequately screening transactions that allegedly involved the purchase and sale of nuclear weapons, as well as transactions of goods and services going to and from Cuba, Sudan, and Iran.
PayPal also allegedly processed 136 transactions that totalled more than $7,000 to and from a registered PayPal account to an individual that is on the US government's blacklist for "weapons of mass destruction", according to the Treasury Department.
"For several years up to and including 2013, PayPal failed to employ adequate screening technology and procedures to identify the potential involvement of US sanctions targets in transactions that PayPal processed," the Treasury Department said in a statement.
"As a result of this failure, PayPal did not screen in-process transactions in order to reject or block prohibited transactions pursuant to applicable US economic sanctions program requirements."
Upon reflection of the settlement, according to The Wall Street Journal, PayPal neither admitted nor denied the allegations, and insisted that security remains a top priority for the government.
"Government compliance is a priority and a central component of how we do business around the world," PayPal chief compliance officer Gene Truono said.
"We recognise that prior to April 2013, PayPal did not have a system that could scan payments in real time in order to block prohibited payments. There was a delay in the scanning, which allowed some prohibited payments to be processed."
In separate news, PayPal Australia has launched a free return shipping service allowing customers to receive a free shipping refund from the company within 14 days.
Customers who opt in to the service and are looking to return an item will be able to request a shipping refund on the PayPal website within 14 days. Once approved, they will be reimbursed costs of up to AU$45 on eligible purchases.
Up to four refunds per PayPal account will be allowed until July 31, 2015.