Bank of America has been slapped with over $1.2 billion in federal penalties for not reporting more than $5 billion in suspicious transactions spanning several years. The Treasury Department announced this on Tuesday, just a day before the bank is set to unveil its quarterly earnings report.
The Treasury's Financial Crimes Enforcement Network (FinCEN) levied the $1.2 billion penalty, marking it as the third-largest penalty ever imposed by the department. On top of this, the bank has agreed to pay an $11.6 million settlement over sanctions violations. Bank of America admitted to willfully breaching the Bank Secrecy Act by failing to maintain a compliant anti-money-laundering program and neglecting necessary due diligence on foreign correspondent accounts.
More than $1 billion of the unreported transactions involved high-priority risks, such as Chinese money-laundering networks and activities linked to the southwest border. Treasury Secretary Scott Bessent stressed that these penalties show that even major financial institutions are not above the law.
Bank of America has responded by stating it has invested billions in compliance and is making significant strides in its remediation efforts. The penalties will result in a $1.2 billion non-tax-deductible charge in its third-quarter results, reducing net income by about 17 cents per share. The bank's stock dipped roughly 2% in after-hours trading after the announcement.
The penalties put a spotlight on the record of CEO Brian Moynihan, who has been at the helm since 2010. Moynihan, scheduled to appear on CNBC's "Squawk on the Street" after the earnings report, has emphasized "responsible growth" to steer the bank away from the risky behaviors that played a part in the 2008 financial crisis.
FinCEN's penalty was coordinated with the Office of the Comptroller of the Currency (OCC), which announced a $750 million civil money penalty against Bank of America. This penalty is part of the $1.21 billion total and represents the largest fine ever imposed by the OCC. The office accused the bank of severe violations of the Bank Secrecy Act and anti-money laundering rules, pointing to a failure to address deficiencies identified in a 2024 cease-and-desist order.
Comptroller of the Currency Jonathan Gould criticized the bank's response to its compliance issues, stating the bank's poor handling of its obligations threatens U. S. national and economic security. He warned that the OCC expects all banks to maintain effective compliance programs, and those failing will face significant consequences.
The 2024 order highlighted a "breakdown" in Bank of America's systems for detecting and reporting suspicious activity, including a "systemic failure" to set appropriate thresholds for triggering investigations. The bank was also found lacking in making substantial progress in addressing earlier customer due diligence problems.
In response, Bank of America is now required to conduct a third-party review of undetected suspicious transactions and undergo independent reviews of its transaction-monitoring and customer due-diligence programs.
The Treasury noted that the bank's failures included ignoring red flags related to potential narcotics-trafficking proceeds, fraud, and trade-based money laundering. These issues were not addressed in a timely manner, further compounding the bank's compliance challenges.
