Bank of America Hit by Record Compliance Penalties

The US Treasury Department has imposed more than $1.21 billion in penalties on Bank of America for violations of anti-money laundering and sanctions laws. The penalties include a $1.2 billion assessment by the Financial Crimes Enforcement Network (FinCEN), which the Treasury described as the department’s third-largest penalty, and an additional $11.6 million settlement with the Office of Foreign Assets Control (OFAC). FinCEN said the bank failed to address and report priority national security risks, including Chinese money-laundering networks and illicit finance along the US southwest border. It cited shortcomings in suspicious-transaction identification and reporting and customer due diligence, and said the bank had effectively outsourced a substantial part of its proactive detection and reporting responsibilities to third parties. The Treasury said Bank of America failed to report more than $5 billion in suspicious transactions to FinCEN on time. Separately, the Office of the Comptroller of the Currency (OCC) imposed a $750 million fine—the largest in its history—over what it called the bank’s deficient and ineffective anti-money-laundering compliance programme. FinCEN’s penalty includes credit for the OCC fine, so the two amounts are not additive in calculating the overall penalty. OFAC’s settlement concerns 475 apparent violations of sanctions programmes involving Iran, Russia, narcotics and global terrorism. It includes commitments by the bank on compliance training, testing, audits, and future communication and cooperation with OFAC. Treasury Secretary Scott Bessent said failures at a bank of this size can expose the wider US financial system to illicit-finance risks, adding that the enforcement actions show large institutions are not above the law. The Treasury said the actions emphasize the importance of complying with anti-money-laundering and sanctions requirements. Bank of America said financial-crime compliance is a serious responsibility, and that it has invested billions of dollars in technology and assigned thousands of employees to combat financial crime. The bank said it was well along in, and committed to completing, the work required to address regulators’ concerns.

Bank of America has been fined $1.2bn by the US Treasury Department for failures in its anti-money-laundering and sanctions compliance. The department said the bank failed to report more than $5bn in suspicious activity to authorities, including $1bn it considered to present national-security and illicit-finance risks. The unreported activity included transactions potentially connected to Chinese money-laundering networks and trade-based laundering with links to the southwest US border. The Treasury said Bank of America relied too heavily on information from outside parties, such as law-enforcement agencies and other financial institutions, rather than using its own controls to identify suspicious activity. Under the settlement, the bank admitted it willfully violated the Bank Secrecy Act by failing to maintain a compliant anti-money-laundering programme, conduct required checks on foreign correspondent accounts, and file suspicious activity reports. The overall $1.2bn penalty includes a $750m fine from the Office of the Comptroller of the Currency, the largest penalty that agency has imposed, and a settlement with the Office of Foreign Assets Control. OFAC linked its settlement to 475 apparent sanctions violations involving programmes concerning Russia and Iran, narcotics, and global terrorism. It said the $11.6m settlement reflected its finding that the apparent violations were non-egregious. Treasury Secretary Scott Bessent said failures at a bank of this size could expose the wider US financial system to illicit-finance risks. Bank of America said it was committed to completing remediation work and had already devoted substantial resources to it. The bank also said the penalty would be recorded as a non-tax-deductible charge in its third-quarter results, reducing net income by about 17 cents per share. The announcement came less than a day before the bank was scheduled to report quarterly earnings.

Bank of America reported a 17% year-over-year decline in third-quarter profit to $6.93 billion, or 91 cents per share, after absorbing a $1.2 billion penalty from U.S. regulators. The penalty reduced earnings per share by 17 cents; without it, EPS would have been $1.08. Revenue rose 3.2% to $30.12 billion on a fully taxable-equivalent basis, but missed analysts’ $30.69 billion estimate by about $570 million. Bank shares fell roughly 7% in early trading after the results were released. Trading operations accounted for much of the revenue shortfall. Fixed-income revenue dropped 17% to $2.55 billion, about $450 million below expectations, amid weakness in mortgages, municipal bonds and credit activity. Equities revenue rose 10% to $2.51 billion but still missed forecasts by nearly $300 million. Together, bond and stock trading results declined 5%, contrary to CEO Brian Moynihan’s indication the previous month that trading revenue would be roughly flat. Investment-banking revenue fell 11% to $1.8 billion, broadly in line with expectations and Moynihan’s guidance. Net interest income, a closely watched measure of profitability, increased 7.9% to $16.6 billion, slightly beating estimates. The results also brought scrutiny of the bank’s controls and risk management. Regulators said Bank of America failed to report billions of dollars in suspicious transactions, leading to the penalty announced Tuesday. The episode raises questions about Moynihan’s oversight of controls at the nation’s second-largest bank by assets, particularly given his earlier tenure addressing mortgage-related abuses following the 2008 financial crisis. Wells Fargo analyst Mike Mayo described the bank’s capital-markets results as “easily worst in class.” The report places Bank of America’s performance amid mixed earnings from other large banks, including JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo.