There are plenty of accusations against alleged money laundering by big international bank for drug dealers and terrorists. As late as last Christmas an unnamed bank in Canada paid a penalty for committing over 1000 violations of money laundering rules.
HSBC paid almost $2 billion in fines for laundering for drug dealers and terrorists. We should be more concerned with how billions of dollars are laundered through the system every year than an error in acting cautiously by PayPal.
I have doubts about how big international banks operate but I trust PayPal to operate lawfully and morally.

It our weird and wonderful world of post-facts, banks that have paid fines for laundering money don't excite people but a small error regarding $200 by PayPal will surely bring out marchers and the media will do its best to rile everyone up.