The complaint brought forth by the NFA sheds light on significant concerns regarding the company's anti-money laundering (AML) program. It specifically focuses on the monitoring of suspicious account activities and the adherence to financial crime regulations.

Uncovering the AML Woes of NinjaTrader

Issues with the AML Program

The NFA's investigation has exposed major flaws in NinjaTrader's AML program. The company relied heavily on automated alerts to detect unusual deposits, yet these alerts were frequently ignored or not properly followed up on. Take, for instance, an account flagged due to the presence of a young individual with limited financial experience and strange deposit patterns linked to a person with a criminal record. Despite these clear red flags, the company failed to conduct a more in-depth investigation until the NFA intervened. This lack of proactive action raises serious questions about the company's commitment to combating money laundering.Another aspect that came to light is the company's continued management of accounts from high-risk countries, despite having a clear policy against operating in such regions. They had over 475 accounts from these areas, indicating a blatant inconsistency between their stated policies and actual practices. Such behavior undermines their credibility and raises doubts about their compliance efforts.

Failure to Check Accounts Against FinCEN Lists

A significant problem identified by the NFA is NinjaTrader's failure to screen accounts against FinCEN's Section 314(a) lists. These lists flag individuals and organizations suspected of financial crimes. During a 2023 review, it was discovered that the company had not screened tens of thousands of accounts due to a confusion within their compliance team. This oversight poses a significant risk to the integrity of the financial system and highlights the company's negligence in ensuring compliance.

Leadership and Audit Failures

The NFA's complaint also targets Michael Cavanaugh's leadership. As president, he approved the AML program but failed to ensure its proper implementation. Under his watch, the company accepted high-risk accounts without updating its compliance policies. Additionally, the firm's AML audits were poorly executed, and problems flagged in previous reviews were not adequately addressed. This lack of oversight and follow-through at the leadership level has contributed to the company's current AML issues.The NFA is now demanding disciplinary action against NinjaTrader and Cavanaugh. This could result in hefty fines of up to $500,000 per violation, suspension or expulsion from NFA membership, and for Cavanaugh, a potential ban from future registration with the Commodity Futures Trading Commission (CFTC).According to the NFA, NinjaTrader and its predecessor, York Business Associates, have faced multiple regulatory actions over the years. In 2012, the CFTC fined York for failing to supervise employees involved in a fraud scheme. In 2020, the NFA identified similar issues and penalized York for not investigating suspicious deposit activities.In September 2024, the CFTC ordered NinjaTrader Clearing, LLC to pay over $980,000 for supervision failures related to handling customer accounts. The CFTC's investigation revealed that NinjaTrader did not supervise its employees in dealing with accounts tied to Rajiv Patel. Patel and his company, Bluprint, solicited nearly $10 million from 16 investors for trading in securities but misappropriated the funds for personal use. This latest incident further emphasizes the company's failure to meet regulatory requirements and protect the interests of its customers.