Washington, July 2 (IANS) Chinese e-commerce giant Alibaba Group and its US-based payment processor, AUS Merchant Services, have agreed to pay $600 million under separate non-prosecution agreements with the US Department of Justice to resolve allegations that they failed to prevent the sale and import of illegal pharmaceuticals and related products into America through Alibaba’s online marketplaces.
The settlement includes a $125 million criminal penalty and $200 million in forfeiture by Alibaba, while AUS Merchant Services will pay an $85 million criminal penalty and forfeit $190 million. Together, the payments total $600 million.
According to the Justice Department, Alibaba admitted that between January 2016 and December 2024 it failed to stop merchants using Alibaba.com and AliExpress from carrying out about 80,000 sales involving pharmaceuticals, listed chemicals and pharmaceutical counterfeiting equipment imported into America in violation of US law.
The department said the combined gross merchandise value of those transactions exceeded $200 million. During the investigation, federal agents conducted more than 40 undercover purchases of pharmaceuticals and counterfeiting equipment that were illegal to import into the United States.
Although Alibaba had policies prohibiting such products, the department said company employees raised concerns that compliance controls were inadequate. Some merchants also used Alibaba’s internal messaging service to facilitate unlawful transactions and, in some cases, directed buyers to encrypted third-party messaging platforms.
The company admitted it earned revenue from some of those merchants through membership, advertising, marketing, shipping and payment-processing fees.
AUS Merchant Services admitted that between January 2020 and December 2023 its anti-money laundering compliance programme failed to prevent some Alibaba merchants from using its payment processing services to facilitate sales of prohibited products to US buyers.
The company acknowledged that its transaction monitoring system failed to incorporate certain wire-transfer data, meaning some payments from high-risk jurisdictions or involving multiple payers were not properly identified. In some cases, merchants continued selling prohibited products after AUS had investigated and reported them to Alibaba.
“Today’s resolution reflects the Department of Justice’s commitment to ensuring that companies operating e-commerce and digital payment platforms keep illegal, unapproved, misbranded, and dangerous foreign pharmaceuticals off their marketplaces,” Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division said.
“Companies operating online marketplaces — whether based in the United States or abroad — must implement appropriate safeguards to prevent bad actors from exploiting their platforms. If they fail to do so, the Department will hold them accountable.”
Assistant Attorney General Tysen Duva of the Criminal Division said: “Without active compliance, criminals use e-commerce sites to carry on and profit from illicit activity.”
He added that Alibaba and AUS had “documented steps taken to improve their screening and compliance and provided a commitment to ongoing cooperation with US law enforcement in the future. As a result, another channel for illegal pharmaceuticals and associated equipment is now closed.”
Under the agreements, both companies accepted responsibility for the conduct of their officers, directors, employees and agents. They also agreed to strengthen compliance systems, improve monitoring of transactions and continue cooperating with US authorities in ongoing or future investigations.
Alibaba, founded in China in 1999, operates Alibaba.com, one of the world’s largest business-to-business online marketplaces, and AliExpress, a global consumer shopping platform. The company is listed on the New York Stock Exchange and the Hong Kong Stock Exchange.
–IANS
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