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Interactive Brokers to shell out $38 Million for inadequate AML regime

By Elizabeth Hearst

Interactive Brokers LLC has cut a deal with US regulators amounting to $38 Million, to settle claims that the brokers failed to maintain an adequate anti-money laundering regime.

It is alleged that the company had not sufficiently monitored customers’ wire transfers to the sum of hundreds of millions of dollars. Interactive Brokers are accused of failing to monitor these transfers for money laundering and failure to report potential manipulation of microcap securities in customers’ accounts.

The brokerage was fined by three regulators including the US Securities and Exchange Commission (SEC), the US Commodity Futures Trading Commission and the Financial Industry Regulatory Authority (FINRA) according to the Wall Street Journal. 

Interactive Brokers agreed to pay the multi-million dollar settlement without an admittal or denial of findings against the company. A spokesperson for the brokerage said that it was fully co-operative with the regulators and the steps it had taken to improve its anti-money laundering regimes were reflected in the settlement reached. 

The investigation by FINRA  focused on a five-year period from January 2013 to September 2018 when Interactive Brokers became one of the largest electronic broker-dealers in the US. It is alleged that “Interactive Brokers failed to strengthen its anti-money laundering programme in tandem with its growth”, said FINRA. 

An investigation by the SEC focused on a one-year period during 2017, in which Interactive Brokers failed to file more than 150 suspicious activity reports that flagged potential manipulation of microcap securities.

The CFTC’s investigation looked at a four year period from June 2014 to November 2018, in which it is alleged that Interactive Brokers did not maintain sufficient anti-money laundering programmes. It is alleged that the brokers failed to ensure its employees followed established protocols in customer account supervision. 

Further investigations concluded that the brokers failed to supervise the accounts of a New York trader who pleaded guilty in 2017 of scamming investors to the tune of more than $23 Million. The CFTC detailed that Interactive Brokers had failed to sufficiently monitor the trader, Haena Park’s account activity. 

The regulators concluded that Interactive Brokers failed to meet its anti-money laundering obligations under the Bank Secrecy Act and the financial record-keeping and reporting provisions of federal securities laws. 

Interactive Brokers settlement includes two $11.5 Million fines made payable to the SEC and the CFTC and a $15 Million fine handed down by FINRA. The broker is also liable for $700,000 in disgorgement to CFTC. 

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