Bank of America missed $5 billion in suspicious activity | Now it faces a $1.21 billion fine for money laundering
US regulators fined Bank of America $1.21 billion on Tuesday for widespread failures to detect potential money laundering and other illicit financial activity. The incident is likely to directly impact its third-quarter earnings.
The US Treasury Department said the fine stemmed from the bank’s failure to report more than $5 billion in suspicious activity to the government. This included $1 billion linked to national security-related and other priority illicit finance risks.
“Financial institutions are on the front lines of protecting our economic and national security,” Treasury Secretary Scott Bessent said in a statement.
“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,” he added.
Why did US regulators penalize Bank of America?
The Treasury said the bank “prioritized its revenues” when building compliance programmes and overly relied on inquiries from outside parties, such as law enforcement and other financial institutions, rather than on its own internal controls.
The consent order requires Bank of America to hire an independent third party to review past transactions, identify suspicious activity that the bank failed to detect at the time, and report those transactions to FinCEN.
As part of the fine, the Office of the Comptroller of the Currency levied a $750 million civil penalty against the lender, the largest ever imposed by the regulator, citing failures to address shortcomings in its anti-money laundering programmes identified in a 2024 cease-and-desist order.
The regulator said the bank’s compliance programme was “deficient and ineffective,” and its transaction monitoring system caused the bank to delay filing suspicious activity reports on billions of dollars of transactions.
Separately, 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 programmes. The Treasury said the bank had mistakenly processed millions of dollars in payments that violated sanctions targeting countries including Russia and Iran.
How will the fine affect Bank of America?
The bank said its third-quarter results, due on Wednesday, will include a non-tax-deductible charge of $1.2 billion, reducing quarterly net income by approximately 17 cents per share.
Analysts surveyed by LSEG had estimated adjusted earnings per share of $1.10, excluding one-off items such as the fine. Bank of America shares fell 2.7% in after-hours trading after closing the day down 1.1%.
UBS analyst Erika Najarian told Reuters that the penalty could add to negative investor sentiment and raise concerns about higher expenses and the bank’s ability to maintain its roughly $6 billion quarterly share buyback pace.
With earnings due on Wednesday, “we think shares likely underperforming at open,” she said. Najarian also noted that the penalty did not include an asset cap, which would restrict how large the bank could grow.
A Bank of America spokesperson told Reuters the lender had invested billions of dollars in technology and dedicated thousands of employees to combating financial crime.
“Financial crime compliance is serious, and we are responsible for getting it right,” the spokesperson said, adding that the bank was committed to completing the work required to address regulators’ concerns.
The penalty comes days after American Express was fined $350 million for similar anti-money laundering shortcomings.
(With inputs from agencies)
