Interactive Brokers Paying $38M to Settle Mix of Charges

News August 10, 2020 at 01:42 PM
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Interactive Brokers agreed to pay a total of $38 million in penalties to settle charges that it violated anti-money laundering laws and regulations, while repeatedly failing to file Suspicious Activity Reports for U.S. microcap securities trades it executed on behalf of clients.

The firm, for instance, will pay an $11.5 million penalty to settle the SAR claims, according to the Security and Exchange Commission's order, which was released Monday. Broker-dealers are required to file SARs for transactions they suspect to involve fraud or a lack of an apparent lawful business purpose.

From at least July 1, 2016, to June 30, 2017, the firm failed to file more than 150 SARs relating to suspicious activity involving certain U.S. microcap securities transactions it executed on behalf of its customers, the SEC alleged.

"During the relevant period, IB ignored or failed to recognize numerous red flags, failed to properly investigate certain conduct as required by its written supervisory procedures, and ultimately failed to file SARs on suspicious activity," it added.

Other Actions

The Financial Industry Regulatory Authority, meanwhile, fined Interactive Brokers $15 million for widespread failures in the firm's anti-money laundering (or AML) program, which the regulator claimed had gone on for more than five years.

As part of the settlement, FINRA also required Interactive Brokers to certify that it would implement the recommendations of a third-party consultant to remedy the firm's AML program failures.

Without admitting or denying the findings, the firm submitted a letter of acceptance, waiver and consent to FINRA on July 28  in which it agreed to the regulator's sanctions. FINRA accepted the letter Monday.

Also, the Commodity Futures Trading Commission on Monday filed and simultaneously settled charges against Interactive Brokers for failing to diligently supervise its officers', employees' and agents' handling of several commodity trading accounts, as well as for failing to adequately implement procedures to detect and report suspicious transactions as required under federal AML laws and regulations.

Brought in connection with the Division of Enforcement's Bank Secrecy Act Task Force, the case marked the first CFTC enforcement action charging a violation of Regulation 42.2, which requires registrants to comply with the Bank Secrecy Act.

The CFTC order requires Interactive Brokers to pay a civil monetary penalty of $11.5 million and disgorge $706,214 earned in part from its role as futures commission merchant carrying the accounts of Haena Park and her companies, which were the subject of a 2018 CFTC enforcement action.

Firm's Response

"We cooperated fully with our regulators in these inquiries, and the significant steps that we have taken to expand and enhance our program were taken into account in today's settlements," Interactive Brokers said in a statement provided to ThinkAdvisor.

"Interactive Brokers continuously works to enhance and strengthen our controls, and makes significant investments to improve our BSA and AML programs," it explained.

"We are committed to ensuring that our programs meet all regulatory expectations and our compliance staff have state of the art systems at their disposal," the firm added.

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