FINRA sanctions compliance officer for AML failures

The compliance officer consented to a two-month suspension from association with any FINRA member in all principal capacities. He also agreed to complete 10 hours of continuing education concerning AML responsibilities by a FINRA-approved provider within 90 days after reassociation with a member firm, according to a consent letter published Friday.

The details: In his capacity as AML compliance officer at Interactive Brokers from July 2006 through August 2018, Arnold Feist was vested by the firm’s written supervisory procedures with “full responsibility” for its AML compliance program, including day-to-day operations. However, from January 2013 through August 2018, Feist “failed to implement and monitor the firm’s AML program” and further failed to develop an understanding of the firm’s AML risk profile, according to FINRA.

Feist also did not fulfill his responsibility to review surveillance reports each month, did not take steps to ensure AML investigations were adequate, and failed to monitor AML compliance activities including due diligence and enhanced due diligence for foreign financial institutions, the consent letter stated.

Feist “failed to recognize” 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,” said FINRA.

Even though Feist was responsible for deciding whether to file a suspicious activity report (SAR), 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,” the consent letter stated. “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.”

According to FINRA, the above actions constituted violations of FINRA Rules 3310 and 2010 governing the development and implementation of a “reasonably designed” AML compliance program and the conduct of member firms and their associated persons, respectively.

Feist accepted and consented to FINRA’s findings without admitting or denying them.

Interactive Brokers in August 2020 agreed to pay $38 million in settlements with three regulatory agencies, including a $15 million penalty levied by FINRA, for AML lapses and repeated failures regarding the filing of SARs.