FINRA recently hit Interactive Brokers LLC with a $15 million penalty for alleged wide-reaching deficiencies in its anti-money laundering (AML) program, which spanned in excess of five years. As a condition of the settlement, in which Interactive Brokers neither admitted nor denied the allegations, FINRA obligated the firm to put in place a third-party consultant’s recommendations designed to remedy its AML program’s weaknesses. If that did not sufficiently ruin Interactive Broker’s day, the Securities and Exchange Commission, as well as the Commodity Futures Trading Commission, each announced enforcement actions in which they fined the firm $11.5 million for AML breakdowns, resulting in excess of $38 million in total fines and penalties.
FINRA contended that during a period of dramatic growth, ranging from January 2013 through September 2018, Interactive Brokers evolved into one of the largest electronic broker-dealers in the country. Yet, notwithstanding that growth, Interactive Brokers did not allocate the necessary resources to fulfill its AML requirements, per FINRA. FINRA identified Interactive Broker’s purported AML lapses as follows: (1) it failed to reasonably review hundreds of millions of dollars of customer wire transfers, including third-party deposits from designated “high risk” countries, for possible money laundering; (2) it did not reasonably investigate suspicious activity when discovered due to a lack of resources and a sufficiently designed case management system; and (3) it failed to put in place procedures reasonably designed to adequately report suspicious transactions.
Given these lapses, FINRA contended that Interactive Brokers did not reasonably detect and report several situations of suspicious activity that turned out to be market manipulations and Ponzi schemes.
FINRA, in assessing the sanction, took into account the “meaningful” remedial steps that Interactive Brokers put in place subsequent to the initiation of FINRA’s investigation. While the alleged AML lapses were serious, wide-spread and spanned over five years, but for the firm’s proactive remedial steps, the sanctions would have likely been worse.
FINRA Defense Lawyer David Chase
David R. Chase, a FINRA defense lawyer, represents associated individuals and broker-dealers nationwide in FINRA investigations and FINRA administrative cases. If you are under investigation by FINRA, call FINRA defense lawyer David Chase for a no cost, confidential consultation toll-free at: (800) 760-0912 or david@davidchaselaw.com.
