Bank of America has been hit with a substantial $1.2 billion (£910 million) fine for severe failings in its anti-money laundering (AML) protocols, the US Treasury Department announced on Tuesday. The banking giant was found to have inadequately detected and reported over $5 billion in suspicious activity, with $1 billion of this sum directly linked to national security and illicit finance risks, according to the Treasury.
The Treasury Department highlighted specific deficiencies in the bank’s operations. These included Bank of America’s failure to flag transactions potentially associated with Chinese money laundering networks. Furthermore, the bank did not identify trade-based laundering operations that had “a substantial nexus to the southwest border.” A critical finding was the bank’s over-reliance on external inquiries from entities like law enforcement and other financial institutions, rather than establishing and maintaining robust internal controls. This practice, according to the department, meant the bank “effectively outsourced to third parties a substantial portion of its proactive detection and reporting obligations,” a core responsibility under financial regulations.
Regulatory Admissions and Penalties Breakdown
As part of the comprehensive settlement, Bank of America admitted that it “willfully violated” the Bank Secrecy Act. This admission encompasses a range of failures, including not maintaining a compliant anti-money laundering programme, failing to conduct required due diligence on foreign correspondent accounts, and neglecting to file suspicious activity reports as mandated by law.
The $1.2 billion fine represents the third-largest penalty ever imposed by the Treasury Department. This significant sum comprises penalties from multiple regulatory bodies involved in the oversight:
- The Office of the Comptroller of the Currency (OCC) levied a $750 million fine against Bank of America. This penalty stands as the largest single fine the OCC has ever imposed, underscoring the gravity of the compliance failures.
- The Office of Foreign Assets Control (OFAC) reached a separate settlement with the bank amounting to $11.6 million. This specific penalty was tied to 475 apparent violations of various sanctions programmes, which included those targeting Russia and Iran, as well as those related to narcotics trafficking and global terrorism. OFAC noted that its determination was that Bank of America’s apparent violations were “non-egregious.”
Bank’s Financial Impact and Remediation Efforts
The announcement of this substantial fine came less than 24 hours before Bank of America was scheduled to release its quarterly earnings, adding immediate financial context to the regulatory action. The bank confirmed the direct financial impact, stating in an emailed statement, “Our third-quarter results will include a non-tax-deductible charge of $1.2 billion impacting net income by approximately 17 cents per share.”
In response to the regulatory findings and the imposed penalty, Bank of America provided a statement to the BBC, affirming its commitment to rectifying the issues. “Our team is far along with and committed to completing the work required to address the issues raised by our regulators,” the bank stated. It further added, “We have already dedicated substantial personnel and resources to our ongoing remediation efforts, and those costs are in the current expense base,” indicating ongoing investment in strengthening its compliance framework.
Broader Systemic Risks Highlighted
Treasury Secretary Scott Bessent emphasized the far-reaching consequences of such compliance lapses, particularly from an institution of Bank of America’s scale. “When a bank of this size fails to meet its anti-money laundering and sanctions obligations, the consequences extend far beyond its own walls, exposing the entire US financial system to significant illicit finance risks,” Bessent stated, highlighting the systemic vulnerability created by inadequate controls.
This significant penalty and Bank of America’s admission of willful violations underscore the critical importance of robust and proactive internal compliance systems in safeguarding the integrity of the global financial system against illicit finance. The bank’s ongoing and substantial remediation efforts will be under close scrutiny as it endeavors to fully address the identified deficiencies and restore full regulatory confidence.
