FINRA Fines Electronic Broker-Dealer for AML Failures

Electronic broker-dealer Interactive Brokers LLC was recently fined $15 million by FINRA for widespread failures in its anti-money laundering (AML) program.

From 2013 to 2018, Interactive Brokers grew substantially to become one of the largest electronic broker-dealers in the United States based on shares traded. The electronic broker-dealer also cleared transactions for more foreign financial institutions than any other broker-dealer in the United States.

However, according to FINRA, Interactive Brokers did not adjust and did not dedicate the necessary resources to meet its AML obligations.

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.

According to FINRA, Interactive Brokers lacked sufficient personnel and a reasonably designed case management system to properly investigate suspicious activity when it found it. FINRA says it took Interactive Brokers years to increase its AML staffing or augment its AML systems.

Because of this, Interactive Brokers did not monitor, detect, and report many instances of suspicious activity that were Ponzi schemes, market manipulation schemes, and other misconduct.

As part of the 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.

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