Online auction company eBay said its PayPal auction payment unit is being investigated for possible violations of the USA Patriot Act. In its 10-K financial report to the U.S. Securities and Exchange Commission, eBay said its PayPal unit received a letter on March 28 from the U.S. Attorney's office for the Eastern District of Missouri about the alleged violations. The letter says that PayPal violated provisions in the Patriot Act between October 2001 and July 2002 by providing payment services to online gambling merchants. This action violated provisions in the Patriot Act that "prohibit the transmission of funds that are known to been derived from a criminal offense or are intended to be used to promote or support unlawful activity." The U.S. Attorney's office is asking eBay to repay nine months of the gambling-related earnings in settlement, as well as interest. Last year, PayPal received 6% of its revenue from online gambling, according to its filing with the Securities and Exchange Commission. eBay has not yet declared whether it will pay the settlement and said in its filing that "PayPal acted in the good faith belief that its conduct did not violate [the USA Patriot Act]." This is not the first time that PayPal has been cited for violations; in August of 2002, the service settled with the New York attorney general for $200,000 over processing payments for New York online gambling merchants. eBay acquired PayPal in October, 2002 and has since stopped processing online gambling payments. The USA Patriot Act was passed after the September 11, 2001 terrorist attacks and gives law enforcement authorities more leeway to investigate and monitor Internet usage to reduce the possibility of future terrorist acts.