how to mitigate compliance risks for your account with Interactive Brokers

Recently, more and more news has appeared about the troubles for Interactive Brokers clients from the side of the compliance department: for someone frozen account due to vacation in Crimea, yesterday a number of clients received letters about introducing an additional commission for them in the amount of $ 150-1400 per year “For being suspicious.”

Alina Ananyeva (administrator of the unofficial group about IB on Facebook) brought together all currently known signs that may trigger the compliance department of Interactive Brokers and lead to undesirable consequences.

Here it is necessary to immediately make a reservation that there cannot be an exact and exhaustive list of criteria – banks and brokers do not publicly disclose the list of “red flags” so as not to make it easier for real “unscrupulous investors” to bypass them. But by indirect signs, many of the criteria can be distinguished – which Alina did. Below is its text (with the consent of the author), published in a closed FB-group.

Opening an account

  • Passport and tax residence: RF is the most high-risk; for Ukraine, Kazakhstan and other CIS countries, the level of risk is slightly lower. At the same time, many clients from the Russian Federation never have compliance issues.

  • Minimum level of risk for residents of “developed countries”: USA, EU, UK, Japan, etc. However, the risk is higher if the passport is high risk.

  • You cannot be a resident or passport holder, relating to Crimea or Belarus (the invention of schemes leads to blocking). Cases are known: obtaining a passport of another country with the delivery of a toxic one + necessarily moving + opening a new account.

  • SoW (Source of Wealth). When answering questions about the source of capital, you should indicate those that you can easily confirm with documents for at least 2/3 of the amount on the account. It is better to avoid “gift”, “loan” and “inheritance” (there may be a request for confirmation of the origin of funds from the donor / lender).

Transfers to and from the account

  • Do not use small amounts (suspicion that this is a split for the sake of weaker currency control of the bank).

  • Withdraw to those accounts from which you started (IB will not allow withdrawals to an account from which there was no minimum deposit).

Market operations

  • IBKR is required to monitor attempts to manipulate prices… It is especially easy to be manipulated on cheap pink sheets, junk bonds. The broker analyzes transactions on client accounts originating from one asset manager or from one IP.

  • Wash sales: under US law, if a losing position is closed and then opened before the expiration of a period of 30 days, this loss cannot be taken into account to reduce the tax base for that year. For US tax accounting, the position will continue to be open (remark: according to the Tax Code of the Russian Federation, this position will reduce the tax base; sometimes colleagues recall judicial precedents in which the court recognized such a transaction as null and void, but it was about large corporate blocks of shares or shares not traded on the stock exchange) … I don’t see any potential problems with IBKR scoring, for example, because this is a typical operation for such trading styles as intraday, swing, algo.

Life style

  • Do not go to Crimea on vacation (trading operations were blocked on the accounts of several clients in September; unblocking was achieved by a client who confirmed his permanent residence not in Crimea (utility bills; air tickets, hotel for vacation).

  • It’s probably best not to use a VPN anywhere, so as not to involve verification.

If you know any more risk criteria – write in the comments with a link to supporting cases!


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