FINRA securities brokerage firms such as Interactive Brokers have various duties under FINRA Rules and federal law to safeguard customer assets and guard against money laundering.

The U.S. Bank Secrecy Act (BSA) is set out in 31 U.S.C. Sec. 5311 – 5330. Securities Broker-Dealers such as IB are defined as a “financial institution” under the BSA. 31 U.S.C. Sec. 5312(a)(2).  “Money Laundering” is defined in 31 U.S.C. Sec. 5340 as “the movement of illicit cash or cash equivalent proceeds into, out of, or through the United States, or into, out of, or through United States financial institutions…”
The fraudulent theft of customer monies through unauthorized withdrawals/transfers by ACH or wire meets the definition of “money laundering” because it involves the movement of illicit cash through and out of United States financial institutions.
The Bank Secrecy Act requires financial institutions such as IB to develop and institute internal policies, procedures, and controls to “guard against” money laundering. Specifically, 31 U.S.C. Sec. 5318(h) requires:

“(h) Anti-Money Laundering Programs.—
(1) In general.—In order to guard against money laundering through financial institutions, each financial institution shall establish anti-money laundering programs, including, at a minimum—
(A) the development of internal policies, procedures, and controls;
(B) the designation of a compliance officer;
(C) an ongoing employee training program; and
(D) an independent audit function to test programs.”

FINRA Rules require IB and other member securities firms to comply with the BSA and associated regulations, and implement appropriate policies and procedures. Specifically, FINRA Rule 3310 states: “Each member shall develop and implement a written anti-money laundering program reasonably designed to achieve and monitor the member’s compliance with the requirements of the Bank Secrecy Act (31 U.S.C. 5311, et seq.), and the implementing regulations promulgated thereunder by the Department of the Treasury.” FINRA Notice to Members 02-21 also advised broker-dealers “to look for signs of suspicious activity that suggest money laundering” – or, “red flags” – and if they detect “red flags,” to “perform additional due diligence.”

Interactive Brokers was censured and fined $15,000,000.00 by FINRA in 2020 in a letter of Acceptance, Waiver, and Consent (AWC) for “deficient” Anti-Money Laundering procedures and procedures/supervision relating to money transfers. IB’s documented failures therein included the same situation as the arbitration above – “[IB] did not reasonably surveil for AML purposes outgoing wire transfers identified as “first-party” transfers (i.e., transfers where the recipient was the customer itself), because the Firm accepted customers’ designations that they were first-party wire transfers, even when the Firm learned that some purportedly “first-party” wires were, in fact, third-party wires.”

Greco & Greco has been representing harmed investors against their securities brokerage firms for over twenty-five years. If your investment firm has transferred monies from your account to criminals or scammers without your knowledge or consent, please contact Virginia Securities Fraud Lawyer Scott Greco for a free consultation about your potential case.

According to the indictment, from July 2017 through March 2021, Welsh, operating as a financial advisor registered with Wells Fargo Clearing Services, purportedly abused his position to misappropriate funds entrusted to him by clients. Instead of responsibly managing their investments, Welsh is accused of diverting substantial sums into accounts under his control, leaving his clients in financial distress. The charges carry severe penalties, with each wire fraud count potentially leading to 20 years in prison and a $250,000 fine, while the investment advisor fraud count could result in five years behind bars and a $10,000 fine, or twice the gross gain or loss from the offense.

The indictment details that Mr. Welsh allegedly used multiple fraudulent means to siphon off customer funds, including having customers sign forms in blank, fraudulently forging signatures, and carrying out unauthorized wires from customer accounts.

U.S. Attorney Philip R. Sellinger emphasized the importance of maintaining trust in financial advisors, stating that investors must have confidence that their advisors will act in their best interests. The FBI, led by Special Agent in Charge James E. Dennehy, played a crucial role in investigating the case.

FINRA Broker-Dealers such as Wells Fargo have duties to supervise their registered representatives such as Mr. Welsh. They must have a reasonable supervisory system designed to follow up on red flags and prevent violations of the law such as what occurred here.

Mr. Welsh’s FINRA Brokercheck report reveals that Wells Fargo has already paid out over a million dollars in settlements of claims related to Mr. Welsh, and another multi million dollar arbitration is pending.

W. Scott Greco of the securities fraud law firm Greco & Greco, P.C. has decades of experience representing customers against their brokerage firms related to broker theft of customer funds. If you believe you may have been the victim of a fraud or theft by your trusted financial advisor, please contact securities fraud lawyer Scott Greco for a free attorney consultation about your case.