Interactive Brokers: Brokerage Sanctions Controls and the 2025 OFAC Settlement

Interactive Brokers agreed to pay $11,832,136 in its 2025 OFAC sanctions settlement over apparent violations involving customer access, securities trades, margin lending and funds transfers. The company had sanctions controls. The Office of Foreign Assets Control described what happened when those controls missed locations, failed to screen automated trades or produced alerts that staff mishandled. For someone inside a brokerage, the important evidence may sit where the compliance policy meets the software.

The agency announced the settlement on July 15, 2025. Its account covered 12,367 apparent violations from July 15, 2016 through January 31, 2024. Interactive Brokers identified and disclosed the transactions through a sanctions review it began on its own in 2018.

A Brokerage Does More Than Execute Trades

Interactive Brokers’ services put sanctions controls inside several different parts of the business. The Greenwich, Connecticut company executes, clears and settles trades for individual and institutional investors through an online platform. It generally clears trades on an omnibus basis in the United States, including business for non-U.S. customers. The Office of Foreign Assets Control also described margin lending, funds transfers, foreign exchange, securities lending, algorithmic trading and market data services.

A customer can gain market access through the trading platform, borrow against an account, exchange currencies and send money to a bank. Each service has its own decisions and data. The apparent violations in this settlement reached across those services, including actions the brokerage’s systems took automatically.

Customer Addresses Said One Thing, IP Data Another

The Office of Foreign Assets Control described customers whose account information pointed outside sanctioned jurisdictions while their internet activity placed them inside. Most of the affected customers supplied know-your-customer information indicating ordinary residence elsewhere. IP addresses, sometimes combined with further investigation, revealed their locations when transactions occurred.

From July 2016 through July 2021, more than 200 accountholders in Iran, Cuba, Syria and Crimea engaged in nearly 12,000 transactions using the brokerage’s services. A technical bug and other geoblocking deficiencies allowed some customers to use the desktop and mobile applications. The agency said Interactive Brokers had not adequately audited or tested those systems.

There were gaps in the location list too. Crimea was missing before May 2019. After that, IP addresses associated with Sevastopol remained absent until June 2021. The firm also relied on introducing brokers’ assurances that they would not bring in new clients from Crimea.

The access problem appeared in another form at Exodus Movement. In that company’s settlement, the Office of Foreign Assets Control described customer-support recommendations to use VPNs to overcome exchange controls.

The Other Failures Were Inside the Products

The agency’s account followed transactions through transfers, margin systems, issuer screening and alert review. Several of the failures occurred after the customer already had an account.

Transfers to Blocked Russian Banks

Interactive Brokers processed 259 customer funds transfers to accounts at blocked Russian banks between February and October 2022. The Office of Foreign Assets Control said the firm attempted or completed those transfers under the mistaken belief that wind-down licenses authorized them.

This was a decision about what a license permitted. The transfer service kept moving customer instructions toward banks that had already been designated.

Automatic Margin Sales Without Securities Screening

The system protecting a margin loan could itself generate a prohibited trade.

According to the Office of Foreign Assets Control, Interactive Brokers’ Consumer Communication Protocol order system did not screen securities for sanctions restrictions before processing those automatic liquidation orders. It processed 29 sales involving 13 issuers subject to Chinese Military-Industrial Complex sanctions. The system could recognize that a position needed to be sold without checking whether the sale was permitted.

Russian Accounts Regained Margin Permissions

A separate technical deficiency reopened borrowing that the firm had restricted. After the prohibition on new investment in Russia, Interactive Brokers took steps to stop customers located there from opening new margin positions, including positions in non-Russian securities.

The agency said a technical defect allowed two accounts to regain margin permissions between March 30 and April 3, 2023. They initiated 66 margin loans during 2023, earning the brokerage interest. Restricting the account had not kept it restricted.

What Is the 50% Rule in OFAC Sanctions?

OFAC’s 50 Percent Rule treats an entity as blocked when blocked persons own at least half of it, directly or indirectly in the aggregate. Ownership information therefore matters alongside a name match.

The Office of Foreign Assets Control described 18 Interactive Brokers transactions in securities issued by Xinjiang Tianye Water Saving Irrigation System Co Ltd., or Xinjiang Water. The issuer was at least half-owned by the sanctioned Xinjiang Production and Construction Corps. A delay in obtaining ownership information allowed the trades to proceed. The missing connection was between the security being traded and its blocked owner.

Alerts That Did Not Stop the Activity

The screening system sometimes found the customer, and the failure came afterward. In the Venezuela episode, staff incorrectly treated a sanctions match as a false positive. The agency described three attempted withdrawals and ten foreign exchange transactions on behalf of the blocked customer.

In the Syria episode, the firm processed two transfers totaling approximately $339,000 after its screening function had flagged the customer’s account. The account remained unblocked for more than a month. The Office of Foreign Assets Control attributed the delay to insufficient resources and the absence of a clear process for prioritizing and escalating sanctions queries. An alert waiting for attention left the account available for transactions.

The Settlement, the Maximum and the Base Penalty

The statutory maximum civil penalty was $5,234,583,687. The Office of Foreign Assets Control set the base civil penalty at $60,130,059 after crediting voluntary disclosure and treating the violations as less severe. The settlement came in far below even that starting figure.

The agency credited the company’s cooperation, transaction reviews and remedial work, along with the limited economic benefit to sanctioned parties in many instances. It also pointed to failures of care across a sophisticated, technology-driven business and said the firm knew or had reason to know of the conduct as it occurred.

The Office of Foreign Assets Control identified the harm in concrete terms: people sanctioned for supporting corrupt regimes gained access to the U.S. financial system, and trades gave blocked issuers access and legitimacy. A small share of the brokerage’s total activity could still undermine the sanctions those controls were meant to enforce.

The company’s fixes included correcting a compilation problem in its geoblocking software and adding a tool to monitor repeated access attempts from sanctioned jurisdictions. The agency emphasized testing fixes after implementation.

What the Systems Show a Brokerage Insider

The case makes testing, data and staff decisions central to the story. A geoblocking rule needs the right locations and functioning software. An issuer screen needs ownership data. A margin restriction needs to survive changes in account permissions. A sanctions alert needs a timely decision that reaches the account’s trading and transfer functions.

The Wharton Initiative on Financial Policy and Regulation’s 2024 paper, Anti-Money Laundering: Opportunities for Improvement, explains that financial institutions often use the same compliance infrastructure for anti-money laundering and sanctions obligations. It argues for reviewing how the system works as threats and priorities change, including whether new infrastructure would serve better than repeated fixes to an existing system.

That perspective fits the failures the agency described here. Customer information, location data, securities restrictions and the resulting trades have to meet inside the working system. An employee who knows which data arrived late, which automated action bypassed screening or why an alert stayed unresolved may understand a failure that the written policy never shows.

Whistleblower Rewards for Sanctions Information

The Office of Foreign Assets Control’s notice identifies the Financial Crimes Enforcement Network’s whistleblower incentive program as covering sanctions violations as well as Bank Secrecy Act violations. It says individuals in the United States or abroad may qualify for awards when their information leads to a successful enforcement action with monetary penalties exceeding $1,000,000. Our whistleblower experts work with brokerage insiders to build the strongest sanctions whistleblower case their evidence supports.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know Where the Control Broke

If you know why an automated trade escaped screening or an account stayed active after a sanctions alert, talk to our whistleblower experts. We build the case with you, bring in sanctions whistleblower lawyers who understand brokerage systems, and stay beside you as the case develops.