Moving to distance itself from any form of online gambling, US-based online payment provider PayPal has opened some of its client accounts to the taxman.

The US Inland Revenue Service (IRS) demanded PayPal spill the beans on various accounts connected with the use of “offshore” credit cards by US citizens.

Now some online gamers have received WARNINGS from the IRS that their accounts are being probed.

Tough Deal

PayPal — owned by the internet auction site eBay — was a common payment method for many online gamblers until it was fined £5 million by the US government for supplying financial services to offshore gambling sites.

The size of the fine matches the profit from the trades made by PayPal, which also agreed to stick by a tough code of conduct for at least two years.

All internet gambling is effectively banned in the US and the responsibility for enforcing the law is placed on banks and other financial institutions.

Industry insiders say PayPal’s latest cave-in was inevitable given the previous settlement payout.