NEW YORK, October 13 — Bank of America has been fined $1.21 billion by US regulators for widespread failures to identify and report potentially suspicious financial activity, including transactions linked to money laundering and other illicit activities. The bank said the penalty would significantly reduce its third-quarter earnings.
The US Treasury Department said the penalty, the third-largest in its history, followed the bank’s failure to report more than $5 billion in suspicious transactions to authorities. Of that amount, approximately $1 billion involved national security-related concerns and other priority illicit finance risks.
Treasury Secretary Scott Bessent said financial institutions play a critical role in protecting the country’s economic and national security, warning that failures by major banks can expose the broader financial system to significant risks.
According to the Treasury Department, Bank of America placed excessive emphasis on revenue when developing its compliance programs and relied too heavily on inquiries from law enforcement agencies and other financial institutions rather than its own internal monitoring systems.
Regulators Demand Independent Transaction Review
Under a consent order, Bank of America must appoint an independent third party to review historical transactions, identify suspicious activity that the bank previously failed to detect, and report those transactions to the Financial Crimes Enforcement Network (FinCEN).
The Office of the Comptroller of the Currency imposed a $750 million civil penalty, the largest ever issued by the regulator. The agency cited failures to address deficiencies in the bank’s anti-money laundering systems that had been identified in a 2024 cease-and-desist order.
The regulator described the bank’s compliance program as “deficient and ineffective,” stating that weaknesses in its transaction-monitoring systems delayed suspicious activity reports involving billions of dollars in transactions.
Bank of America said it has invested billions of dollars in technology and assigned thousands of employees to combat financial crime. A company spokesperson said the bank was committed to completing the corrective measures required by regulators.
Sanctions Violations Add to Regulatory Penalties
The Treasury Department also announced that Bank of America paid an $11.6 million fine to the Office of Foreign Assets Control for more than 400 apparent violations of multiple sanctions programs.
According to the department, the bank mistakenly processed millions of dollars in payments that violated sanctions targeting countries including Russia and Iran.
The enforcement action comes days after American Express was fined $350 million over similar anti-money laundering deficiencies, highlighting increased regulatory scrutiny of financial institutions’ efforts to detect and prevent illicit financial activity.
Fine Expected to Reduce Quarterly Earnings
Bank of America said its third-quarter results, scheduled for release Wednesday, would include a non-tax-deductible charge of approximately $1.2 billion. The expense is expected to reduce quarterly net income by about 17 cents per share.
Analysts surveyed by LSEG had estimated adjusted earnings of $1.10 per share, excluding exceptional expenses such as the regulatory penalty.
The bank’s shares fell 2.7% in after-hours trading following a 1.1% decline during the regular session.
UBS analyst Erika Najarian warned that the penalty could weigh on investor sentiment, increase concerns about compliance-related expenses and raise questions about whether Bank of America can sustain its quarterly share repurchase pace of approximately $6 billion.
Najarian said the shares could underperform at the market open following the announcement. She also noted that regulators had not imposed an asset cap, which would have restricted the bank’s ability to expand its balance sheet.
Compliance Costs and Investor Confidence in Focus
The penalty places renewed attention on the cost of maintaining effective financial crime controls at major banks. Regulators require financial institutions to identify suspicious transactions, comply with sanctions and report potential violations promptly.
For Bank of America, the immediate impact includes a substantial earnings charge and additional work to review past transactions and strengthen its monitoring systems.
Investors will also be watching whether the bank can complete the required remediation while maintaining profitability, controlling operating expenses and continuing shareholder returns.
The enforcement action underscores the financial and reputational consequences banks can face when regulators determine that their anti-money laundering and sanctions controls have fallen short.
Original article
Comments