Terry Shewchuck vacationed in Cuba several years ago and discovered animal care was almost non-existent. Dogs and cats were roaming free, without veterinary care or spay and neuter services.

So Shewchuck filled the void, voluntarily setting up veterinary clinics, providing supplies and spaying and neutering thousands of animals in Havana and around Cuba. He's run the charity, called the Spanky Project, from the Toronto area for almost 10 years.

All of it was paid for by donations from people around the world through online payments system PayPal.

"All of a sudden, in June 2013, we hit a snag," says Shewchuck. A donation of $700 was flagged, and the funds and accounts were frozen by PayPal.

The company, based in California, sent a letter to Shewchuck explaining the activity violated United States regulations, specifically the US trade embargo with Cuba. "So it is the long arm of the U.S.A. reaching into Canada, and shutting us down."

International business professor Walid Hejazi says Canadian law protects American subsidiaries like Paypal Canada from US trade embargoes.

"It's a real surprise that PayPal would go after this kind of a transaction," says Hejazi.

The company told Shewchuck it would return the money in six months. But until then, his projects in Cuba will be less some funds.

"We never want to get in the way of people’s desire to do good, and worthy causes like animal protection, are very close to our heart," said PayPal in a prepared statement. "The U.S. government has clear regulations about Cuba, and as a U.S. company, PayPal, and all our subsidiaries outside of the U.S., have to comply."

The company adds: "We have let the charities know how to apply and we'll be delighted to help the charities raise funds with PayPal as soon as they secure the required license."