If you’re paying for computer programming, web design etc. to India via PayPal, think again for the time being. In response to the Indian government’s crackdown on international money laundering, PayPal has suspended “personal payments to and from India and transfers to local banks in India…Customers can still make commercial payments to India but merchants cannot withdraw funds in Rupees to local Indian banks.”

India-based affiliates for online marketers who pay commissions via PayPal are probably going to have a difficult time getting paid now too.

In this case, you shouldn’t shoot the messenger. PayPal is going to have a difficult time verifying the identities of those who send payments. Until it comes up with a solution that satisfies India’s government, don’t expect resumption of payments.

One hopes that the issue is simply one of fighting money laundering rather than India looking for a way to track payments for income taxation and other regulatory purposes.

If you send funds by PayPal to India and the money gets returned, at least you’ll know why. Although a hassle, one temporary solution is to use international bank wire transfers because you’re providing your identity via your bank when sending the funds. Of course, that may mean renegotiating your agreements with Indian independent contractors to cover the additional transfer fees and modifying your affiliate program operating agreement to take into account additional costs too.

Hat tip: Personal Payments and local bank transfers in India (PayPal blog)