The settlement, announced by the U.S. Department of Justice, addresses allegations that Alibaba’s U.S.-based payment processor, AUS Merchant Services, failed to implement adequate safeguards to prevent unlawful transactions involving third-party merchants on the company’s online marketplaces, including Alibaba.com and AliExpress.

Although Alibaba has entered into the agreement, the company reached a non-prosecution agreement with federal authorities rather than facing criminal charges.

According to the Justice Department, Alibaba acknowledged that from January 2016 through December 2024, it failed to prevent approximately 80,000 product sales involving goods that violated the Federal Food, Drug, and Cosmetic Act and other U.S. laws governing imported products.

Compliance Concerns Raised Internally

Federal officials said the investigation found that Alibaba employees had expressed concerns internally about weaknesses in the company’s compliance systems. According to the settlement announcement, those safeguards were not sufficient to prevent illegal products from being listed and sold through the company’s platforms.

Authorities also alleged that, in certain cases, merchants used Alibaba’s internal messaging tools to direct customers to third-party communication platforms, where transactions involving prohibited products could be completed outside the company’s primary marketplace.

The Justice Department said these practices contributed to unlawful imports entering the United States through Alibaba-operated marketplaces.

Undercover Purchases Supported Investigation

The investigation involved multiple federal agencies, including the U.S. Food and Drug Administration (FDA), IRS Criminal Investigation (IRS-CI), the Federal Deposit Insurance Corporation (FDIC), and other law enforcement partners.

Officials said investigators carried out more than 40 undercover purchases of pharmaceuticals and equipment that were illegal to import into the United States. Those purchases formed part of the evidence supporting the settlement.

The Justice Department stated that the agreement requires Alibaba to strengthen its compliance measures governing third-party sellers that market products to U.S. customers.

Alibaba Says Settlement Resolves Matter

In a statement, Alibaba said it had reached a mutually satisfactory resolution with the U.S. government and would implement stronger compliance procedures for products sold by third-party merchants to customers in the United States.

The company said the agreement reflects its commitment to improving oversight of its e-commerce platforms while continuing to support lawful cross-border trade.

Federal Officials Emphasize Corporate Compliance

Federal authorities said the settlement demonstrates the government’s continued focus on enforcing laws governing imported pharmaceuticals, regulated chemicals, and controlled substances sold through online marketplaces.

IRS Criminal Investigation Chief Jarod Koopman said the resolution highlights the agency’s commitment to tracing financial activity linked to unlawful commerce and ensuring companies operating in the United States comply with federal law.

The $600 million settlement concludes the government’s investigation without criminal prosecution while requiring Alibaba to strengthen oversight designed to prevent illegal products from reaching U.S. consumers.

Tags: Alibaba, U.S. Department of Justice, FDA, IRS Criminal Investigation, E-Commerce Regulation, Consumer Protection, Federal Food Drug and Cosmetic Act, Corporate Compliance, Online Marketplace, Trade Enforcement

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