Anonymous PayPal card: how it ended up blocked by Spain's Banco de España
PayPal's prepaid card was never anonymous: it was issued by a firm supervised by Banco de España, which eventually revoked its licence and blocked 100,000 customers.
English · Original discussion in Spanish · Published
The "anonymous" PayPal card that ended up blocked
Can you get paid online and withdraw the cash from an ATM without the tax authorities knowing who you are? That is the question this story opens with: an occasional eBay seller who uses PayPal to avoid moving the money to his bank account, and who discovers there is a PayPal prepaid card that, on paper, carries no printed name. The doubt is whether the cardholder is logged when it is used at an ATM. The short answer: yes. The long answer fills the rest of this story, and it ends with the issuer's licence revoked by Banco de España (Spain's central bank and financial regulator) and tens of thousands of customers with their balances frozen.
What the PayPal prepaid card is and who issued it
The card was not issued by PayPal. It was issued by Younique Money, an electronic money institution licensed by Banco de España, licence number 6701. That detail dismantles the fantasy from minute one: an entity supervised by the Spanish regulator answers to the Spanish tax agency, whether or not the plastic has a name on it. The anonymity was towards the ATM, not towards the tax office.
The magnetic stripe stores the cardholder. Any ATM transaction leaves a trail of date, amount and source account. The name does not need to be printed on the card for the bank to know whom to charge the fee. The nameless card is a commercial convenience, not a tax shield.
How much money you can move before the alarms go off
Here comes the first concrete threshold of the story: below 300 euros a month the practical risk is low; beyond that, according to the circulating rule of thumb, the rope starts to tighten. It is not a legal figure, it is a prudence estimate. The real framework is different: PayPal joins the SEPA area and before March 2014 its accounts will have IBANs and the same anti-fraud treatment as any bank account.
The IBAN discussion is the most revealing one. Some argue that if the code is Luxembourg-based, PayPal will not report to the Spanish tax authorities unless ordered by a court. Others point out that the obligation to declare foreign accounts existed before: form DD1 filed with Banco de España, mandatory simply for holding the account, and form 720 filed with the tax agency only above 50,000 euros. The debate was only half settled: the IBAN was never clearly seen before everything else blew up.
The alternatives: Payoneer, Neteller and the offshore myth
The next twist is the search for another card. Payoneer comes up, with dollar balances and fees laid out without embellishment: 29.95 dollars a year, 3.15 dollars per ATM withdrawal, 1 dollar for a declined transaction, 3 dollars in monthly maintenance. For a freelancer billing US clients it makes sense; for withdrawing cash at a Spanish 4B ATM, it does not. Neteller, Netspend and Skrill are also mentioned, with the question of whether or not they are under Spanish supervision.
The offshore dream falls apart on its own: Switzerland no longer has banking secrecy, and accounts in grandma's name end with the tax office asking where 10,000 euros deposited in a year into an account with no work activity came from. The unavoidable conclusion is uncomfortable: nothing on the internet is anonymous.
The outcome: licence revoked and balances blocked
The story does not end with an elegant tax answer. It ends with Banco de España revoking the licence of PayPal's card issuer and blocking some 100,000 customers. There are concrete accounts: a 250-euro top-up at 11 in the morning, a block at 19:00 on orders from the regulator and the 4B network. Balances of 490 euros, of 23 euros, of 0.96 euros. And the realisation that the owning family had already been through a similar episode with a previous card.
Was the risk worth it? The answer the events themselves give is that the risk was not fiscal, it was counterparty risk: the money could vanish through an administrative decision, not through an inspection.
In the end, the anonymity turned out to be the least of it. The problem was not the tax office watching you: it was the regulator leaving you with no balance on a Friday afternoon.
Can you get paid online and withdraw the cash from an ATM without the tax authorities knowing who you are? That is the question this story opens with: an occasional eBay seller who uses PayPal to avoid moving the money to his bank account, and who discovers there is a PayPal prepaid card that, on paper, carries no printed name. The doubt is whether the cardholder is logged when it is used at an ATM. The short answer: yes. The long answer fills the rest of this story, and it ends with the issuer's licence revoked by Banco de España (Spain's central bank and financial regulator) and tens of thousands of customers with their balances frozen.
What the PayPal prepaid card is and who issued it
The card was not issued by PayPal. It was issued by Younique Money, an electronic money institution licensed by Banco de España, licence number 6701. That detail dismantles the fantasy from minute one: an entity supervised by the Spanish regulator answers to the Spanish tax agency, whether or not the plastic has a name on it. The anonymity was towards the ATM, not towards the tax office.
The magnetic stripe stores the cardholder. Any ATM transaction leaves a trail of date, amount and source account. The name does not need to be printed on the card for the bank to know whom to charge the fee. The nameless card is a commercial convenience, not a tax shield.
How much money you can move before the alarms go off
Here comes the first concrete threshold of the story: below 300 euros a month the practical risk is low; beyond that, according to the circulating rule of thumb, the rope starts to tighten. It is not a legal figure, it is a prudence estimate. The real framework is different: PayPal joins the SEPA area and before March 2014 its accounts will have IBANs and the same anti-fraud treatment as any bank account.
The IBAN discussion is the most revealing one. Some argue that if the code is Luxembourg-based, PayPal will not report to the Spanish tax authorities unless ordered by a court. Others point out that the obligation to declare foreign accounts existed before: form DD1 filed with Banco de España, mandatory simply for holding the account, and form 720 filed with the tax agency only above 50,000 euros. The debate was only half settled: the IBAN was never clearly seen before everything else blew up.
The alternatives: Payoneer, Neteller and the offshore myth
The next twist is the search for another card. Payoneer comes up, with dollar balances and fees laid out without embellishment: 29.95 dollars a year, 3.15 dollars per ATM withdrawal, 1 dollar for a declined transaction, 3 dollars in monthly maintenance. For a freelancer billing US clients it makes sense; for withdrawing cash at a Spanish 4B ATM, it does not. Neteller, Netspend and Skrill are also mentioned, with the question of whether or not they are under Spanish supervision.
The offshore dream falls apart on its own: Switzerland no longer has banking secrecy, and accounts in grandma's name end with the tax office asking where 10,000 euros deposited in a year into an account with no work activity came from. The unavoidable conclusion is uncomfortable: nothing on the internet is anonymous.
The outcome: licence revoked and balances blocked
The story does not end with an elegant tax answer. It ends with Banco de España revoking the licence of PayPal's card issuer and blocking some 100,000 customers. There are concrete accounts: a 250-euro top-up at 11 in the morning, a block at 19:00 on orders from the regulator and the 4B network. Balances of 490 euros, of 23 euros, of 0.96 euros. And the realisation that the owning family had already been through a similar episode with a previous card.
Was the risk worth it? The answer the events themselves give is that the risk was not fiscal, it was counterparty risk: the money could vanish through an administrative decision, not through an inspection.
In the end, the anonymity turned out to be the least of it. The problem was not the tax office watching you: it was the regulator leaving you with no balance on a Friday afternoon.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (86 replies).
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