Alibaba & AUS Agree to $600 Million DOJ Resolution Over Illegal Pharmaceutical Sales

Key Takeaways

• $600 Million Resolution: Alibaba and AUS entered non-prosecution agreements requiring $600 million in combined criminal penalties and forfeitures.
• Marketplace Compliance Failures: Alibaba admitted it failed to prevent approximately 80,000 prohibited transactions involving pharmaceuticals, listed chemicals and pharmaceutical counterfeiting equipment between 2016 and 2024.
• AML Deficiencies: AUS acknowledged weaknesses in its transaction monitoring and anti-money laundering compliance program that failed to stop some prohibited transactions.
• Compliance Reforms Required: Both companies agreed to strengthen compliance programs, continue cooperating with the Justice Department and accepted responsibility for the underlying conduct.

Deep Dive

Alibaba had policies forbidding merchants from selling illegal pharmaceuticals, listed chemicals and pharmaceutical counterfeiting equipment through its marketplaces. Employees questioned whether those policies were working when merchants found ways around them. Some shifted conversations into Alibaba's private messaging system before directing buyers to encrypted third-party platforms. Others continued operating even after concerns had been identified. According to the U.S. Department of Justice, the controls never kept pace with the activity they were supposed to stop. That failure has now produced one of the largest corporate resolutions involving online marketplace compliance.

Alibaba and AUS Merchant Services, the U.S.-based payment processor, have entered into non-prosecution agreements with the Justice Department requiring the companies to pay a combined $600 million to resolve allegations that they failed to prevent the sale and importation of illegal pharmaceuticals, controlled substances, listed chemicals, pill presses and other prohibited products into the United States through Alibaba.com and AliExpress.com.

Under the agreements, Alibaba will pay a $125 million criminal monetary penalty and forfeit $200 million. AUS will pay an $85 million criminal monetary penalty and forfeit $190 million. The companies also agreed to strengthen their compliance programs, continue cooperating with the Justice Department and accepted responsibility for the conduct of their officers, directors, employees and agents in connection with the underlying conduct.

Thousands of Transactions, Years of Failures

The Justice Department said Alibaba admitted that between January 2016 and December 2024 it failed to prevent merchants using Alibaba.com and AliExpress.com from completing approximately 80,000 sales involving products imported into the United States in violation of the Federal Food, Drug, and Cosmetic Act and other federal laws. Those transactions included List I and II chemicals, pharmaceuticals and pharmaceutical counterfeiting equipment.

The combined gross merchandise value of the transactions exceeded $200 million. Federal investigators did not rely solely on transaction records. During the investigation, law enforcement agencies carried out more than 40 undercover purchases of pharmaceuticals and counterfeiting equipment that were illegal to import into the United States.

According to the department, Alibaba earned revenue connected to those merchants through membership fees, marketing, advertising, shipping and payment-processing services. The government also alleged that Alibaba's internal messaging system became part of the problem. Merchants used the platform to discuss unlawful transactions with buyers and, in some cases, redirected those conversations to encrypted messaging applications outside Alibaba's marketplaces.

Payment Controls Under Scrutiny

The resolution extends beyond the marketplace itself. AUS admitted that between January 2020 and December 2023 it accepted U.S. dollar-denominated payments through credit cards and wire transfers routed through U.S. bank accounts before transferring the funds offshore for settlement on behalf of customers.

When the company implemented its own transaction-monitoring system, it failed to fully incorporate certain wire-transfer data. The Justice Department said those gaps meant the system did not consistently identify transactions involving payments from high-risk jurisdictions or multiple payors associated with a single invoice.

The company also admitted that weaknesses in its anti-money laundering compliance program failed to prevent some Alibaba merchants from using its payment services to facilitate prohibited sales into the United States.

In some cases, AUS reported merchants selling prohibited products to Alibaba instead of systematically restricting them from using its payment services. According to the Justice Department, at least one merchant continued selling prohibited products to U.S. buyers after AUS had investigated and reported the activity.

Why the Companies Avoided Prosecution

The Justice Department said several factors influenced its decision to resolve the matter through non-prosecution agreements rather than pursue criminal charges. Among them were the companies' remedial efforts, continued improvements to their compliance programs, cooperation with investigators, acceptance of responsibility, lack of prior criminal history and commitment to assist in ongoing or future investigations related to the conduct.

Assistant Attorney General Brett A. Shumate of the Justice Department's Civil Division said companies operating online marketplaces, regardless of where they are based, must maintain safeguards that prevent illegal, unapproved, misbranded and dangerous pharmaceuticals from reaching consumers through their platforms.

Assistant Attorney General Tysen Duva of the Criminal Division said Alibaba and AUS had documented improvements to their compliance and screening processes and committed to ongoing cooperation with U.S. law enforcement, adding that the resolution closes another avenue used to distribute illegal pharmaceuticals and related equipment.

For the U.S. Attorney's Office in Rhode Island, the agreement also sets a record. First Assistant U.S. Attorney Charles C. Calenda said the $600 million resolution is the largest monetary settlement in the district's history and combines financial accountability with compliance measures designed to strengthen oversight and better protect American consumers.

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