Govindasamy, from Bolton, Greater Manchester, is passionate about Ancient Egypt and named her horse after the Egyptian goddess Isis, rather than the murderous terror cult.
She has previously owned horses called Pharaoh and Nefertiti, both also allusions to Egyptian history.
Three days after agreeing to send the cash, Govindasamy was contacted by the trainer to say nothing had been received - and found the transaction was still pending.
She said she was left "speechless" when she was then contacted by PayPal and told her transaction was under review to "minimise risk for us or our customers".
The confusion meant she was forced to explain she had been paying for her horse's training rather than funnelling money to extremists. She was even required to provide her horse's passport as proof.
Govidasamy claimed she was also contacted by Interpol over the security scare, but the policing organisation does not contact individuals directly and its national bureau in the UK provides intelligence and support to the National Crime Agency (NCA).
She said: "I'm really interested in Ancient Egypt - Isis is the goddess of goddesses.
"When Isis was born, if she'd been a colt he would have been called Osiris. When I knew she was a filly I knew Isis was the name for her."
After the rise of the terror group, Govidasamy recalled, she had several people tell her that she would "have to change her name".
"I said 'I'm not changing her name, I absolutely refuse she's called Isis after the Egyptian goddess and if people can't get past that then they've got an issue'," she continued.
The horse owner, who described herself as "a bit scatty", said the payment wording "went right over my head" until her husband explained why it had been flagged.
"When the penny dropped I was speechless.
"I'd been flagged as a potential terrorist. I remember thinking 'what does this mean, what will happen now?'.
"I was investigated, as was the other side where the money was going to, and I explained in detail what was happening and that my horse was called Isis."
She claimed she had to sign a declaration that she had no connection or affiliation to a terror group of any sort before the funds were finally released.
The horse trainer, who asked not to be named, shared details of the story online, writing: "That embarrassing moment when you get asked a million questions to check if you are a terrorist or not because Susan Govindasamy uses Ice's official name of Isis on a payment reference through PayPal.
"There's me telling him to Google it and it's after a goddess not actually Isis-related oh gosh embarrassing.
"Susan from now on she's Ice especially when sending payment references."
A spokesman for PayPal said Government regulations require that companies which process payments including PayPal scan all transactions for "terrorist and other references".
He added: "We do everything we can to eliminate references that have nothing to do with terrorism, and work with customers to resolve quickly any issues that might inadvertently arise."
