Paypal question regarding making all customers verify themselves before purchase

Hello Everyone.

Over the past 4 weeks my site has been doing extremely well. I have been getting a lot of orders and the conversion rate has been good from order submits to people paying.

Recently over the last 3 days I have noticed that my conversion rate has dropped dramatically. I am still getting the same amount of people submitting their details for orders, but when it comes to the next stage of paying via paypal 95% of these people drop off and fail to pay.

I decided to contact a few of the people who did not pay and they informed me that Paypal asked them to verify their own account before they could make the purchase. I'm sure you are all familiar with how annoying this can be. As a result most people did not have the time to do so OR they simply did not have their personal details in front of them to do it.

Due to this problem my sales have dropped dramatically and im highly concerned.

My question to everyone is, can paypal do this to websites on a random basis?
Has my website maybe been flagged by paypal?
Has this ever happened to anyone else?

Many thanks for reading and i look forward to your response.

Kind regards

Jason