According to an announcement by IFPI, online payment provider PayPal has agreed to help strangle the finances of sites offering unauthorized music. While it appears that the initial targets are Russian and Ukrainian MP3 services, the deal will also be of concern to torrent sites that rely on PayPal to accept site donations.

In March this year IFPI announced that they had reached agreement with MasterCard, Visa and the City of London Police to develop cooperation against sites selling unauthorized music. Under the deal, IFPI investigators hand evidence of infringement to the police who proceed to engage the payment processors.

“Once the police have verified the evidence, they notify MasterCard and Visa who require the acquiring bank providing the retailer with payment services to produce evidence of appropriate licenses to sell music or cease providing those services to the retailer,” IFPI explained.

It’s suggested by IFPI that the main targets of the action are Russian ‘AllofMP3’-style clones, sites that often operate legally under domestic legislation much to the disappointment of the international music industry.

However, the engagement of a new and powerful ally this week has the potential to affect many ‘private’ members-only BitTorrent sites, wherever they may be.

While the March announcement from MasterCard and Visa would have been of little concern to the majority of torrent sites, the news that online payment processor PayPal is now getting on board will be viewed very differently and will sound a cautionary warning for the future.

Admittedly the relationships between PayPal and torrent sites don’t always run smoothly (accounts and funds are often frozen or completely lost), but nevertheless PayPal remains the long-standing donation service of choice for dozens, maybe hundreds, of torrent sites. Very often donations are their only source of revenue.

While in connection with this scheme IFPI specifically refer to the ‘sale’ of illicit music (something which the vast majority of torrent sites don’t directly engage in), previous anti-piracy cases have framed torrent site user donations as “subscriptions” or “paid memberships.” To the UK police, who have already been happy to arrest the admins of several torrent and other file-sharing sites, the difference may be academic.

“Today’s announcement shows that PayPal is very serious about fighting music piracy,” said Carl Scheible, PayPal UK’s managing director.

“We’ve always banned PayPal’s use for the sale of content that infringes copyright, and the new system will make life even harder for illegal operators. Our partnership with the music industry helps rights holders make money from their own content while stopping the pirates in their tracks.”

As highlighted in our earlier article, it is perfectly possible to run a few-hundred-thousand-peer private tracker for a fairly modest monthly outlay but with rising costs associated with topsite access (for obtaining new content quickly) and site-run seedboxes, outlay can begin to spiral out of control.

If the music industry does indeed pressure PayPal to take action against torrent site donations as well as sites directly selling unauthorized music, administrators will be forced to reconsider their positions. Some will undoubtedly call it a day.