A trio of U.S. regulators has sanctioned Interactive Brokers LLC for transaction reporting and anti-money laundering (AML) failures.
The U.S. Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and the Commodity Futures Trading Commission (CFTC) announced disciplinary penalties against the Greenwich, Conn.-based firm totalling US$38 million — FINRA levied a US$15 million fine, while the SEC and CFTC each fined it US$11.5 million.
The sanctions settle charges that Interactive Brokers “repeatedly failed to file” suspicious activity reports (SARs) for client trades in U.S. microcap securities, and for anti-money laundering failures.
“As a result of these failures, Interactive Brokers did not reasonably surveil, detect, and report many instances of suspicious activity that were Ponzi schemes, market manipulation schemes, and other misconduct,” FINRA said.
The SEC’s order found that Interactive Brokers failed to recognize red flags in certain client transactions, failed to properly investigate suspicious activity, and failed to file timely reports even when suspicious transactions were flagged by its compliance personnel.
Along with the monetary sanctions, the firm also agreed to disgorge more than US$700,000 in revenues generated from a client that was later found to have committed fraud. It also agreed to comply with certain conditions, including the recommendations of an outside compliance consultant.
The firm settled the regulators’ allegations without admitting or denying the findings.
“Today’s action is a reminder that member firms must tailor their AML programs to the firms’ business model and customer base, and also dedicate resources to programs commensurate with their growth and business lines,” said Jessica Hopper, executive vice president and head of enforcement at FINRA, in a statement.
“Today’s multi-agency settlement reflects the seriousness we place on broker-dealers complying with their SAR reporting obligations and maintaining appropriate anti-money laundering controls,” added Marc Berger, director of the SEC’s New York office.