The US Treasury has penalized Bank of America $1.21 billion for failing to flag billions in suspicious transactions. This enforcement action follows systemic breakdowns in the lender's anti-money laundering protocols and sanctions monitoring.
The $5 Billion Blind Spot and National Security Risks
Bank of America failed to report more than $5 billion in suspicious activity to federal authorities, according to the Treasury Department. Most alarming is the revelation that $1 billion of those transactions were linked to priority illicit finance risks and national security threats. This suggests that the bank's internal filters were not merely lagging, but fundamentally broken when it came to identifying high-risk actors.
Treasury Secretary Scott Bessent stated that the bank effectively prioritized its own revenue streams over the development of robust compliance programs.. As reported by the Treasury, Bank of America relied too heavily on external tips from law enforcement and other financial firms rather than utilizing its own internal controls to catch illicit flows. This creates a dangerous dependency where the government is exepcted to find the crime that the bank was paid to prevent.
The OCC's Record $750 Million Penalty
The Office of the Comptroller of the Currency (OCC) levied a $750 million civil penalty against Bank of America, marking the largest fine in the regulator's history. This penalty stems from the bank's inability to fix shortcomings in its anti-money laundering programs that had already been flagged in a 2024 cease-and-desist order. The OCC described the bank's compliance program as both deficient and ineffective.
A primary failure cited by the OCC was a flawed transaction monitoring system. This technical deficiency caused Bank of America to delay the filing of suspicious activity reports on billions of dollars in transactions, leaving a window of opportunity for illicit funds to move through the US financial system undetected for extended periods.
Russia and Iran Sanctions Breaches
Beyond general money laundering, the Office of Foreign Assets Control (OFAC) fined Bank of America $11.6 million for over 400 apparent sanctions violations. The Treasury reported that the bank mistakenly processed millions of dollars in payments that violated sanctions targeting countries including Russia and Iran. These errors indicate a failure in the bank's screening software and the human oversight required to block prohibited transactions.
This pattern of negligence is not isolated to a single institution. The report notes that American Express was recently hit with a $350 million penalty for similar anti-money laundering failures, suggesting a broader trend of systemic fragility across major US financial intermediaries.
The 17-Cent Per Share Hit to Net Income
The financial repercussions for Bank of America extend beyond the fines. The bank will record a non-tax-deductible charge of $1.2 billion in its third-quarter results, which is expected to reduce quarterly net income by approximately 17 cents per share. Following the news, shares of Bank of America dropped 1.8 per cent in after-hours trading.
While a Bank of America spokesperson claimed the firm has invested billions in technology and thousands of employees to fight financial crime, the scale of the current fine suggests those investments were either mismanaged or insufficient. the bank maintains it is committed to completing the work required by regulators to resolve these issues.
Who benefited from the $5 billion in illicit flows?
Despite the massive fine, several critical details remain hidden from the public. The Treasury has not disclosed the specific identities of the entities or individuals who moved the $5 billion in suspicious funds, nor has it detailed the nature of the "national security-related" risks associated with the $1 billion subset.. Furthermore, it remains unclear why the 2024 cease-and-desist order failed to prompt the necessary changes before the OCC felt compelled to issue its largest-ever penalty.
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