Not one scheme but six, found the same way: a broker looked hard enough at its own systems to find what was already there.
What happened
Interactive Brokers (IB), a Greenwich, Connecticut broker-dealer serving millions of customers across more than 150 exchanges, began a self-initiated sanctions compliance review in 2018. It kept finding things, and kept disclosing them, through 2024. OFAC’s release groups the result into six distinct categories.
- Geo-blocking gaps, 2016–2021. A limited number of customers in Iran, Cuba and Syria accessed IB’s desktop and mobile apps because of deficiencies in its IP geo-blocking, including a technical bug. Separately, IB’s IP block list omitted Crimea entirely before May 2019, and omitted the Crimean city of Sevastopol specifically until June 2021.
- Transfers to blocked Russian banks, 2022. IB processed 259 customer transfers to designated Russian banks, on the mistaken belief that wind-down general licenses covered them.
- An unscreened liquidation engine, 2022–2024. IB’s automatic margin-liquidation system never checked securities against sanctions lists before selling them, processing 29 trades in 13 companies tied to China’s military-industrial complex.
- A control-reactivation bug, 2023. A technical fault let two Russia-based accounts restore margin permissions for three days, during which they took out 66 margin loans over the following months.
- A 50 percent rule ownership delay, 2020–2021. IB processed 18 trades in Xinjiang Water, worth about $28,000, while it was still establishing that the company was majority-owned by a designated Chinese paramilitary group.
- Two mishandled SDN alerts, 2018–2019. IB’s own screening flagged two customers as potential SDN matches. One alert was incorrectly dispositioned as a false positive; the other sat unactioned for more than a month. Both accounts kept transacting in the meantime.
What ties them together
Every category is a control that existed and was not confirmed to be working: a geo-blocking list that was incomplete rather than absent, a liquidation engine built without a screening step anyone would have to notice was missing, a bug that briefly undid a working restriction, an ownership check that took too long to finish, and two alerts that fired correctly and were then handled wrong. See untested screening controls for the geo-blocking and audit failures specifically, and the 50 percent rule for the Xinjiang Water delay.
The penalty
Non-egregious and voluntarily self-disclosed, reflecting what OFAC called “significant remedial measures” and “substantial cooperation… over the course of an extensive, multi-year OFAC investigation.” IB spent 2019 through 2024 rebuilding its programme: strengthened geo-blocking, annual risk assessments and, notably, annual independent audits and ongoing internal testing — the component that was missing when most of this conduct occurred.
What the record shows
- Self-review found what customers, banks and regulators had not. Every one of the six categories came from IB’s own transactional data review, not an external complaint.
- A platform this size fails in parallel, not in sequence. Six unrelated control gaps coexisted for years because no single review had covered all of them at once.
See the TradeStation case for the same geo-blocking failure pattern at a smaller brokerage.