Alibaba Group Holding Ltd. and its U.S.-based payment processor agreed to pay a combined $600 million to resolve Department of Justice (DOJ) allegations that merchants used Alibaba’s online platforms to sell and import illegal pharmaceuticals, controlled substances, listed chemicals, and pill-press equipment into the United States over nearly a decade.
The DOJ announced the resolution on July 1 under separate nonprosecution agreements with Alibaba and AUS Merchant Services, formerly known as Alipay US. The agreements do not amount to guilty pleas or criminal convictions.
Alibaba admitted that from January 2016 through December 2024, merchants using Alibaba.com and AliExpress carried out about 80,000 product sales involving imports that lacked required U.S. approvals or violated federal drug, device, and import laws. The transactions had a combined gross merchandise value of more than $200 million, according to the DOJ.
Federal investigators made more than 40 undercover purchases of drugs and drug-making equipment illegal to import into the United States, with products shipped to the District of Rhode Island by third-party sellers, according to Alibaba’s statement of facts.
Alibaba agreed to pay a $125 million criminal monetary penalty and pay $200 million through civil forfeiture. AUS agreed to pay an $85 million criminal monetary penalty and forfeit $190 million, bringing the total to $600 million.
Charles Calenda, first assistant U.S. attorney for the District of Rhode Island, called the resolution the largest monetary settlement in the district’s history.
Internal Warnings, Private Messages
Alibaba had policies restricting prohibited products on Alibaba.com and AliExpress, but prosecutors said the company’s controls failed to stop sellers from reaching U.S. buyers.
The products included List I and List II chemicals, pharmaceuticals, and equipment used to counterfeit pharmaceuticals, according to the agreements.
The Alibaba agreement says employees at the company’s international commerce business raised concerns at times that compliance measures and filtering systems were inadequate. The business was “not sufficiently reactive or proactive” in following up on those concerns, according to the statement of facts.
Some merchants used Alibaba’s private messaging service to move prohibited transactions forward, the DOJ said. In some cases, sellers used the service to arrange shipments that evaded U.S. customs laws or to direct buyers to encrypted third-party messaging platforms.
Alibaba’s statement of facts says the company derived some profit from illegal seller activity through membership, marketing, advertising, shipping, and transaction-processing fees. The agreement says the $200 million figure refers to prices charged by third-party merchants, not revenue or profit received by Alibaba’s platforms.
Assistant Attorney General Brett Shumate of the DOJ’s Civil Division said companies operating online marketplaces, whether based in the United States or abroad, must put safeguards in place to prevent bad actors from exploiting their platforms.
“Today’s resolution holds Alibaba and Alipay US accountable for failing to prevent the illegal sale of drugs, precursor chemicals, and pill presses into the United States through their online platforms,” Shumate said.
In a statement provided through FGS Global, an Alibaba spokesperson said the company had “reached a mutually satisfactory resolution with U.S. regulators on bringing stricter compliance to the sale of products in the United States by third-party merchants on its e-commerce platforms.”
The spokesperson said the settlement reflected “a thorough regulatory process with Alibaba’s full cooperation” and the company’s commitment to controls, policies, and measures against noncompliant product sales.
Payments Through US Bank Accounts
AUS Merchant Services processed U.S. dollar payments through credit cards and wire transfers routed through U.S. bank accounts before transferring funds offshore for settlement, according to the DOJ. AUS is a subsidiary of Ant Group, the Alipay-operating financial technology company that was spun off from Alibaba in 2011 and in which Alibaba retains a roughly 33 percent minority equity stake.
AUS admitted that from January 2020 through December 2023, its anti-money-laundering compliance program failed to prevent some Alibaba merchants from using its payment-processing and settlement services to facilitate prohibited sales into the United States.
The AUS statement of facts says the company began using its own transaction-monitoring system in 2022 for Alibaba.com-originating transactions, but failed to fully incorporate wire data from its U.S.-based bank accounts. As a result, AUS’s monitoring did not always show when wire-transfer transactions were funded by payments from high-risk jurisdictions or by multiple payors on a single invoice.
AUS and its affiliates sometimes reported merchants selling prohibited products to Alibaba rather than systematically restricting those merchants themselves, according to the agreement.
In one case cited in the agreement, AUS investigated an Alibaba merchant in October 2022 and filed a regulatory report after an employee noted that the merchant had sold prohibited merchandise to U.S. customers using AUS’s payment-processing services.
The same merchant sold additional prohibited merchandise to a U.S. customer in January 2023. In July 2023, an AUS employee reviewing the transaction noted that the product was “prohibited” and could not “be sold online without prescription,” but concluded that the activity was below regulatory reporting requirements, according to the statement of facts.
In a separate emailed statement, an AUS spokesperson said the company was “pleased to have reached an agreement with the U.S. Department of Justice to fully resolve this matter.”
“We have made continuous improvements to our compliance program and will continue to do so to ensure compliance with laws and regulations in all markets where we operate,” the AUS spokesperson said.
New Compliance Rules
The agreements require Alibaba and AUS to enhance their compliance programs and cooperate with ongoing or future criminal investigations tied to the conduct.
Alibaba’s obligations include product-screening controls, risk assessments, permanent bans for repeat violators, periodic reviews of artificial-intelligence-based detection tools, and a “Law Enforcement Green Channel” for U.S. law-enforcement requests. The company must also publish a guidebook explaining what information is available to U.S. law enforcement and how to use the fast-track request system.
AUS agreed to maintain and enhance compliance policies covering the Bank Secrecy Act, anti-money-laundering laws, and the Federal Food, Drug, and Cosmetic Act. Its obligations include a law-enforcement mailbox, suspicious-activity reporting procedures, risk-based transaction monitoring, records of the data used for monitoring, and regular review of transaction-monitoring coverage.
FDA Assistant Commissioner for Criminal Investigations Justin Green said online platforms that facilitate counterfeit and illegal pharmaceuticals and drug-counterfeiting equipment pose “a grave threat to public health and safety.”
FDIC Inspector General Jennifer Fain said AUS’s anti-money-laundering compliance program failed to prevent payments on behalf of “bad actors,” including Alibaba merchants associated with illegal goods.
Assistant Attorney General Tysen Duva of the DOJ’s Criminal Division said Alibaba and AUS had documented steps taken to improve screening and compliance and committed to future cooperation with U.S. law enforcement.
The agreements do not protect Alibaba or AUS from prosecution for future conduct and do not protect individuals from prosecution, regardless of their affiliation with the companies.
