Interactive Brokers paid $38 million over widespread anti-money-laundering and suspicious-activity reporting failures

Summary

Interactive Brokers LLC agreed in August 2020 to pay more than $38 million in combined penalties in parallel enforcement actions by the U.S. Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and the Commodity Futures Trading Commission (CFTC) concerning failures in its anti-money-laundering program and suspicious-activity reporting. The SEC found that Interactive Brokers repeatedly failed to file Suspicious Activity Reports (SARs) for potentially suspicious transactions involving U.S. microcap securities. According to the SEC, during a one-year period Interactive Brokers failed to file more than 150 SARs concerning transactions that displayed red flags for possible market manipulation. The SEC also found deficiencies in Interactive Brokers' investigation and reporting of suspicious activity. In some instances, suspicious transactions identified by compliance personnel were not reported in a timely manner. FINRA separately found widespread deficiencies in Interactive Brokers' anti-money-laundering compliance program lasting more than five years. According to FINRA, Interactive Brokers failed to reasonably surveil hundreds of millions of dollars in wire transfers. These included transfers involving customers and third parties located in jurisdictions considered high risk for money laundering. FINRA also found that Interactive Brokers lacked sufficient compliance personnel and adequate systems to investigate potentially suspicious activity. Interactive Brokers ultimately agreed to pay $11.5 million to the SEC, $15 million to FINRA and $11.5 million to the CFTC, resulting in combined penalties exceeding $38 million. The enforcement actions required Interactive Brokers to improve its anti-money-laundering compliance, surveillance and reporting systems. Primary sources: U.S. Securities and Exchange Commission — Interactive Brokers to Pay $11.5 Million for AML Failures: https://www.sec.gov/newsroom/press-releases/2020-178 FINRA — Interactive Brokers LLC Letter of Acceptance, Waiver and Consent: https://www.finra.org/sites/default/files/2020-08/Interactive-brokers-awc-081020.pdf