Bank of America hit with $1.2B fine over anti-money laundering failures

Bank of America has been hit with a $1.2 billion fine for allegedly violating anti-money laundering and sanctions laws, the U.S. Treasury Department said Tuesday.

The fines on America’s second-biggest bank amount to the third-largest in the department’s history.

The Treasury Department said the fine is due to the bank’s failure to report more than $5 billion in suspicious activity to the government, including $1 billion that posed 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 U.S. financial system to significant illicit finance risks,” he noted.

“Today’s actions send a clear message that even the biggest financial institutions are not above the law.”

Treasury said Bank of America also reached an $11.6 million settlement with the department’s Office of Foreign Assets Control over “apparent violations of numerous sanctions programs, including on Iran, Russia, narcotics, and global terrorism.”

In a statement, Treasury said its Financial Crimes Enforcement Network (FinCEN) assessed the $1.2 billion penalty for Bank of America’s “failure to mitigate and report priority national security risks, including Chinese Money Laundering Networks and illicit finance along the southwest border.”

The penalty includes $750 million that will go to the U.S. Office of the Comptroller of the Currency, the largest fine ever imposed by that federal bank regulatory agency.

Treasury said that Bank of America “admits that it willfully violated” the 1970 Bank Secrecy Act, which requires banks to help the government detect and prevent money laundering.

“Financial crime compliance is serious, and we are responsible for getting it right,” said a Bank of America spokesperson in a statement. “We worked with regulators to reach these penalty resolutions stemming from violations cited in the previously reported 2024 (Comptroller of the Currency) Consent Order and FinCEN’s investigation.”

“We have invested billions of dollars in technology and dedicated thousands of employees to combat financial crime, and our team is far along with and committed to completing the work required to address the issues raised by our regulators,” the statement said.

The spokesperson added that the bank’s third-quarter results due for release on Wednesday would include a non-tax-deductible charge of $1.2 billion, which will reduce quarterly net income ‌by approximately ⁠17 cents a share.

Analysts have estimated adjusted EPS of $1.10, according to mean estimates compiled by LSEG, but that excludes one-offs like this fine.

Shares were down 2.7% in after-hours trading after closing the day down 1.1%.

The penalty is likely to add to negative investor sentiment and raise concerns about higher expenses and whether Bank of America can maintain its roughly $6 billion quarterly share buyback pace, UBS analyst Erika Najarian said in a note.

With earnings due on Wednesday, “we think shares likely underperforming at open,” she said.

She noted there ⁠was no asset cap, a regulatory penalty that would limit how large the bank could grow.

The fine comes days after American Express was also hit with a $350 million penalty for similar anti-money laundering shortcomings.

The latest action is the third-largest penalty ever issued by the Treasury Department, behind a roughly $4 billion settlement in 2023 with Binance, the world’s largest cryptocurrency exchange, and an approximately $3 billion settlement with Canada-based TD Bank the following year. Both those historic actions happened as part of the Biden administration’s focus on anti-money laundering and efforts to promote compliance with the then-emerging virtual currency industry.

Months later, Binance founder and CEO Changpeng Zhao, was sentenced to four months in prison over charges that he looked the other way as criminals used his platform to move money connected to child sex abuse, drug trafficking and terrorism.

DAILYSABAH