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US regulators penalise the banking giant over failures to report suspicious transactions, including activity flagged for national security risks. The fine will also weigh on its third-quarter earnings
Bank of America has been hit with more than $1.21 billion in penalties by US regulators over failures to detect and report more than $5 billion in suspicious transactions, including activity that authorities said posed national security risks. The action is among the largest financial penalties imposed by the US Treasury and comes after regulators found persistent weaknesses in the bank’s anti-money laundering controls.
The US Treasury Department said on Wednesday that the penalties followed failures by the country’s second-largest bank to meet its obligations to identify and report potentially illicit financial activity. More than $1 billion of the transactions involved risks related to national security and other priority areas of illicit finance, including suspicious activity linked to Chinese money laundering networks, fraud and potential trade-based money laundering near the US southwest border.
The penalties include a $1.2 billion assessment by the Financial Crimes Enforcement Network (FinCEN), a Treasury bureau responsible for combating money laundering and other financial crimes. The Office of the Comptroller of the Currency (OCC) separately imposed a $750 million civil penalty, the largest in its history. The Office of Foreign Assets Control also reached an $11.6 million settlement with the bank over apparent sanctions violations. The actions together amount to more than $1.21 billion because the OCC penalty is credited against the FinCEN assessment.
More from BusinessWhy US regulators penalised Bank of America
The Treasury said Bank of America prioritised revenue over compliance resources and relied too heavily on inquiries from law enforcement agencies and other financial institutions to identify suspicious activity, rather than using its own internal monitoring systems.
The department said suspicious transactions accumulated without timely investigation, weakening the usefulness of reports submitted to authorities. The bank also failed to adequately assess customers whose accounts received substantial payments from unidentified third parties, despite warning signs that included possible links to narcotics proceeds, fraud and trade-based money laundering.
The OCC said the bank’s anti-money laundering programme remained deficient and ineffective despite a December 2024 cease-and-desist order requiring it to address longstanding weaknesses.
According to the regulator, shortcomings in the bank’s transaction-monitoring system resulted in delayed suspicious activity reports covering billions of dollars in transactions. The OCC also identified gaps in staff expertise, training and internal audits, which it said had failed to identify persistent compliance problems.
The Treasury said more than $1 billion of the unreported activity involved national security-related and other priority illicit finance risks. The findings underscore the role of banks in identifying potentially illicit flows before they move through the wider financial system.
Russia and Iran sanctions violations
The enforcement action also covers apparent violations of US sanctions. The Office of Foreign Assets Control imposed an $11.6 million settlement over more than 400 apparent violations involving several sanctions programmes, including those targeting Russia and Iran, as well as programmes related to narcotics and global terrorism.
The Treasury said the bank mistakenly processed millions of dollars in payments that violated sanctions restrictions. The settlement adds to the scrutiny of the bank’s systems for identifying prohibited transactions and ensuring compliance with US sanctions rules.
What the penalty means for earnings
Bank of America said the penalty would affect its third-quarter results, which were due to be released on Wednesday. The bank said it would record a non-tax-deductible charge of about $1.2 billion, reducing quarterly net income by approximately 17 cents per share.
The penalty also raises questions about investor sentiment and the bank’s capacity to sustain its share repurchases. UBS analyst Erika Najarian said the action could weigh on the stock as investors assess the financial and operational consequences of the regulatory findings.
Bank of America shares fell 1.1 per cent during Tuesday’s regular session and declined a further 2.7 per cent in after-hours trading, according to Reuters.
The bank said it had invested billions of dollars in technology and employed thousands of people to combat financial crime. A spokesperson said the bank was committed to completing the work required by regulators.
What happens next?
Under the enforcement order, Bank of America must appoint an independent third party to review past transactions, identify suspicious activity that its systems failed to detect and report the findings to FinCEN.
The bank must also undergo independent reviews of its transaction-monitoring systems, customer due diligence procedures, foreign correspondent account checks and relevant data governance framework. These reviews will assess whether its controls can adequately address risks involving the US southwest border, potential narcotics trafficking, Iran and Russia.
The action follows a $350 million penalty imposed on American Express National Bank on October 8 over shortcomings in its anti-money laundering controls, signalling continued regulatory scrutiny of financial institutions’ obligations to detect and report suspicious activity.
