When sending money in that fashion, the sender has the option of eating the fees so that they are essentially sending 103% of whatever the amount is and the recipient gets 100% of the amount specified for the transaction. On the receivers end, this may look like a "Friends and Family" transaction (in that no fees appear to have been taken out), but it's not quite the same, and may still afford the sender some measure of protection. That sounds to me like what's going on here, but as a frequent user of Paypal, I would be interested to hear clarification from the OP as to exactly what the situation is.
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