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Compliance Office sanctioned by FINRA

A compliance officer, that worked at a brokerage firm, was fined $25,000 by the Financial Industry Regulatory Authority (FINRA) for failing to establish and implement a "reasonably designed" anti-money laundering (AML) compliance program.

The compliance officer agreed to a two-month suspension from all principal capacities with any FINRA member. According to a consent letter published Friday, he also agreed to complete 10 hours of continuing education on AML responsibilities from a FINRA-approved provider within 90 days of reassociation with a member firm.

The specifics: In his role as AML compliance officer at Interactive Brokers from July 2006 to August 2018, Arnold Feist was given "full responsibility" for the firm's AML compliance program, including day-to-day operations, according to the firm's written supervisory procedures. According to FINRA, Feist "failed to implement and monitor the firm's AML program" and "failed to develop an understanding of the firm's AML risk profile" from January 2013 to August 2018.

According to the consent letter, Feist also failed to review surveillance reports on a monthly basis, did not take steps to ensure adequate AML investigations, and failed to monitor AML compliance activities such as due diligence and enhanced due diligence for foreign financial institutions.

Interactive Brokers' AML compliance program "was not reasonably designed to detect and cause the reporting of suspicious activity or to comply with Bank Secrecy Act regulations," according to FINRA. Feist "failed to recognize" this.

Despite the fact that Feist was in charge of deciding whether or not to file a suspicious activity report (SAR), the consent letter stated that he 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 three SARs in response to 37 regulatory inquiries by FINRA and the Securities and Exchange Commission."

The above actions, according to FINRA, were in violation of FINRA Rules 3310 and 2010, which govern the development and implementation of a "reasonably designed" anti-money laundering compliance program and the conduct of member firms and their associated persons, respectively.

Without admitting or denying the findings of FINRA, Feist accepted and consented to them.

Interactive Brokers agreed to pay $38 million to three regulatory agencies in August 2020, including a $15 million penalty imposed by FINRA, for AML lapses and repeated failures to file SARs.



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