FINRA Fines Interactive Brokers for Anti-Money Laundering Failures

FINRA recently fined the electronic broker-dealer Interactive Brokers LLC for widespread failures in its anti-money laundering (AML) program, which persisted for more than five years.

As part of the $15 million settlement, FINRA required Interactive Brokers to certify that it will implement the recommendations of a third-party consultant to remedy the firm’s AML program failures.

Since 2013, Interactive Brokers has grown substantially. By 2018, the firm had become one of the largest electronic broker-dealers in the United States based on shares traded, and it cleared transactions for more foreign financial institutions than any other broker-dealer in the United States.

Despite all of this growth, Interactive Brokers did not dedicate the necessary resources to meet its AML obligations, according to FINRA.

For example, FINRA found that the electronic broker-dealer did not reasonably surveil its customers’ wire transfers for money laundering concerns, including millions of dollars of third-party deposits into customers’ accounts from countries recognized as “high risk” by U.S. and international AML agencies.

Also, FINRA found that Interactive Brokers did not investigate suspicious activity when it found it. According to FINRA, this is because Interactive Brokers lacked sufficient personnel and a reasonably designed case management system. FINRA says it took Interactive Brokers years to increase its AML staffing or augment its AML systems.

As a result of these failures, Interactive Brokers did not monitor, detect, and report many instances of suspicious activity that were Ponzi schemes, market manipulation schemes, and other misconduct.

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