From the description of the fault, I am assuming you are using the SmartSDK version of the PaperCut embedded.
Blunt answer, follow the instructions to install PaperCut from the embedded manual Chapter 7.1.1 or 7.1.2 depending if you are doing it with the RoC tool or manually.
But the main step you are missing is changing the SP mode settings:
Code:
Set the Access Control > SDK Certification Device > bit 0 to 0.
Set the MF KeyCard > Job Permit Setting to 0
If PaperCut is the older embedded running on the controller. e.g. SDK/J then the main thing would be to ensure
Code:
Set the Optional Counter Type > External Optional Counter Type to 0.
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