The US Financial Industry Regulatory Authority (FINRA) has imposed a fine of $15 million on Interactive Brokers LLC for AML failures that lasted for more than five years. FINRA has also asked Interactive Brokers to hire a third-party consultant to upgrade the firm’s AML framework. Additionally, the Securities and Exchange Commission, and Commodity Futures Trading Commission have also taken disciplinary actions against Interactive Brokers, levying fines worth another $11.5 million for AML violations. Therefore, Interactive Brokers has to pay more than $38 million in total fines.
Interactive Brokers became one of the biggest electronic broker-dealers in the US during 2013-18. However, FINRA detected the firm’s failure to allocate adequate resources to fulfill its AML obligations. Interactive Brokers did not monitor transactions worth hundreds of millions of dollars, even when third-party deposits were made into its customers’ accounts from high-risk countries. Moreover, Interactive Brokers did not hire adequate staff to investigate suspicious activity.
The firm also violated the requirements of the Bank Secrecy Act by failing to set up AML procedures and internal controls that would enable the reporting of suspicious transactions. Even in the cases when the firm’s staff did recognize suspicious activity, the firm filed Suspicious Activity Reports only after FINRA asked it to comply. This led to many incidents of suspicious activity going unaccounted at Interactive Brokers.