FINRA fines, suspends former Interactive Brokers AML Compliance Officer
Andrew J. Feist, a former AML Compliance Officer (AMLCO) at Interactive Brokers, has agreed to a fine and a temporary suspension, as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
From January 2013 through August 2018, Feist – then Interactive Brokers’ AMLCO – failed to establish and implement a reasonably designed anti-money laundering (AML) program at the firm. Feist thus violated FINRA Rules 3310(a), 3310(b), and 2010.
Feist was Interactive Brokers’ AMLCO from July 2006 through August 2018. The firm’s written supervisory procedures vested Feist, as AMLCO, with “full responsibility” for Interactive Brokers’ AML program, including its day-to-day operations, and required him to review one of each of the firm’s surveillance reports every month to ensure that analysts “handled [them] in accordance with [the firm’s] procedures.”
From January 2013 through August 2018, while he was Interactive Brokers’ AMLCO, Feist failed to implement and monitor the firm’s AML program.
Feist failed to meaningfully familiarize himself with the firm’s AML program as it was being implemented on a day-to-day basis. Feist did not supervise the firm’s AML analysts or their supervisors (over whom he had “dotted line” supervisory responsibilities). Nor did Feist take other steps to understand how the firm was implementing its AML program. He failed to regularly perform the monthly review of at least one of the firm’s surveillance reports, as set forth in the firm’s written supervisory procedures, and failed to develop an understanding of the firm’s AML risk profile.
Feist also did not assess whether the firm’s AML analysts were reviewing the firm’s AML surveillance reports on a timely basis and he did not evaluate the adequacy of the firm’s surveillance reports. Additionally, he did not take steps to determine whether the firm’s AML investigations were adequate. Moreover, Feist failed to monitor other AML compliance activities at the firm, such as due diligence and enhanced due diligence for foreign financial institutions.
Additionally, while he was AMLCO, Feist learned about, but failed to recognize the import of, facts that should have alerted him that Interactive Brokers’ AML program was not reasonably designed to detect and cause the reporting of suspicious activity or to comply with Bank Secrecy Act regulations.
For example, Feist was aware that Interactive Brokers received wire deposits from unknown remitters (known at the film as “no-data wires”) and recognized that such wires posed AML risks to the firm. Many of those wires, which totaled hundreds of millions of dollars during the period that Feist was the firm’s AMLCO, originated from countries with a heightened risk of money laundering.
Rather than treat those wires as third-party wires and subject them to monitoring and review, Interactive Brokers chose to treat them as first-party wires, and firm analysts did not review, or contact customers to determine the origin of, no-data wires. Feist took no steps to investigate or address the firm’s review of no-data wires for AML purposes.
Finally, as AMLCO, it was Feist’s responsibility to decide whether Interactive Brokers would file a Suspicious Activity Report (SAR). However, Feist incorrectly believed that the firm did not need to file a SAR concerning suspicious activity the firm first learned about from regulators or law enforcement agencies investigating that same conduct. From February 2014 to March 2016, for example, the firm filed only 3 SARs in response to 37 regulatory inquiries by FINRA and the SEC.
Therefore, Feist violated FINRA Rules 3310(a), 3310(b), and 2010. B.
Feist also consents to the imposition of the following sanctions:
- a two-month suspension from association with any FINRA member in all principal capacities;
- a $25,000 fine; and
- an undertaking to satisfactorily complete 10 hours of continuing education concerning AML responsibilities, by a provider not unacceptable to FINRA, within 90 days after reassociation with a member firm.