Square, like PayPal, does their transactions in the US, I believe. I think the main difference between them is that PayPal money stays in your account, while Square will send the money to your verified bank account. Costs are different, 2.75% on swiped cards for Square. 2.9% + .30$US per transaction for PayPal.
Whether or not it's a "legitimate" transaction? I'd compare it to any online purchase, personally. But that's neither here nor there, since I thought it said 2013 instead of 2012 when I replied.
Good catch, Simon!