Interactive Brokers to Pay $11.8 Million for Sanctions Violations Across Multiple Jurisdictions & Programs

Key Takeaways

• $11.83M Settlement: Interactive Brokers agreed to pay OFAC to settle over 12,000 apparent violations of sanctions involving Iran, Cuba, Syria, Crimea, Russia, and China.
• Service Exports to Sanctioned Jurisdictions: IB enabled securities trades and fund transfers for over 200 users located in comprehensively sanctioned regions between 2016 and 2021.
• Transactions with Blocked Russian Banks: IB processed 259 transfers to Russian banks after they were designated as blocked, misinterpreting wind-down general licenses.
• Unscreened Chinese Securities Trades: IB processed margin-related transactions involving securities tied to China’s military-industrial entities due to system gaps.
• Remediation and Cooperation: OFAC credited IB for voluntarily disclosing the violations and implementing significant compliance improvements.

Deep Dive

Interactive Brokers LLC has agreed to pay nearly $11.83 million to settle a wide-ranging enforcement case with the U.S. Treasury’s Office of Foreign Assets Control (OFAC). The fine stems from thousands of transactions spanning more than seven years that violated multiple U.S. sanctions programs, including dealings linked to Iran, Cuba, Syria, Crimea, Russia, and Chinese military-linked firms.

In total, OFAC flagged more than 12,000 apparent violations that occurred between July 2016 and January 2024. The agency said the violations were voluntarily self-disclosed and not deemed egregious, noting that Interactive Brokers cooperated extensively during the multi-year investigation and took meaningful steps to strengthen its compliance program.

Where Things Went Wrong

Interactive Brokers offers online brokerage and investment services to customers around the world. But according to OFAC, the firm’s systems didn’t always keep up with the complex patchwork of U.S. sanctions regulations.

From 2016 to 2021, IB provided trading and investment services to more than 200 account holders located in comprehensively sanctioned jurisdictions like Iran, Cuba, Syria, and the Crimea region of Ukraine. These users executed nearly 12,000 transactions, despite the company having policies in place intended to block such activity.

So how did it happen? OFAC’s investigation found that while most customers listed addresses in non-sanctioned countries, deeper analysis of IP data revealed many were actually accessing the platform from restricted jurisdictions. A technical bug and gaps in the firm’s IP geo-blocking controls allowed users in Iran, Cuba, and Syria to slip through. Until 2019, IB also failed to block IP addresses linked to Crimea, particularly the major city of Sevastopol.

Adding to the issue, IB relied heavily on third-party brokers to ensure compliance, including preventing new customers from Crimea, without fully verifying those controls.

Trouble With Russian Banks and Chinese Securities

The violations didn’t stop there. Between February and October 2022 (just months after Russia’s invasion of Ukraine) IB processed 259 customer transfers to Russian banks that had been designated as blocked entities. The firm mistakenly believed these were permitted under general licenses meant for winding down business.

Then, from July 2022 to January 2024, IB processed 29 securities sales involving Chinese companies linked to military and intelligence activities. These trades were triggered automatically through margin account liquidations, a common feature in brokerage platforms. However, IB’s system at the time didn’t screen securities for sanctions restrictions before executing the sales.

OFAC took a relatively measured tone, crediting Interactive Brokers for its self-initiated compliance review, which began in 2018, and its decision to report the issues proactively. The agency also acknowledged the company’s significant remediation efforts, including upgrading sanctions screening, tightening IP controls, and making other system-wide improvements.

Still, the settlement is a reminder that even unintentional violations can carry steep consequences, especially when they span years and involve complex global transactions.

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