Interactive Brokers’ $38m penalty for anti-money laundering failures is a clear warning that the authorities are cracking down

Interactive Brokers has agreed to pay $38 million in penalties to three US regulators to settle claims that it failed for more than five years to meet obligations under the Bank Secrecy Act (BSA) to maintain an adequate anti-money-laundering program.

The firm had to pay $11.5 million to the Securities and Exchange Commission for failing to file suspicious activity reports and $11.5 million to the Commodity Futures Trading Commission (CFTC) for deficiencies in its AML program. The $15 million paid to the Financial Industry Regulatory Authority (FINRA) relates to the fact that, between 2013 and 2018, Interactive Brokers grew to become one of the largest electronic broker-dealers in the US, but failed to ensure its AML program kept pace with its growth.

The broker-dealer has consented to pay the settlements without admitting to or denying the regulators’ findings; steps it has taken to enhance its AML safeguards have been considered in the penalties agreed.

John Dobson, CEO of AML firm SmartSearch says the huge fines levied on Interactive brokers not only highlights the serious consequences of not adhering to BSA/AML obligations, but also, signifies that the authorities are clamping down harder than ever on those financial institutions that are still not complying with the rules.

“This case is a warning from the authorities that they mean business. Not meeting BSA/AML obligations is not an option – you will get caught, and you will pay. And there will now undoubtedly be other firms that have been getting away with inadequate AML programs for years desperately trying to remedy this before they become the next Interactive Brokers.”

Dobson says the easiest way to achieve and maintain a fully compliant customer database is to switch to an Electronic Verification (EV) system like SmartSearch.

 SmartSearch is a fully comprehensive identification and verification system; just enter the client’s details and it runs a full AML check – with Sanction and PEP Screening – delivering the result in seconds, and automatically running Enhanced Due Diligence on any matches.

He continues: “Our system also monitors all clients on an ongoing basis, so if anything changes, you will be alerted. And for those who have perhaps not kept their AML programs up to date, we can even run retrospective checks on clients, flagging up anything suspicious and regularly monitoring all clients going forward, covering any gaps to ensure your entire database is fully compliant.

“EV is not only the easiest way to run your AML program, but it is cheaper, more efficient, reliable and more robust than any other solution, offering the only way you can be sure you are meeting all your BSA/AML obligations.”