Bank of America fined $1.2 billion over money-laundering violations

Bank of America was hit with more than $1.2 billion in federal penalties Tuesday after regulators said the nation’s second-largest bank failed for years to report more than $5 billion in suspicious transactions and fix longstanding anti-money-laundering problems.

More than $1 billion of the unreported activity involved national security and other high-priority risks, including Chinese money-laundering networks and activity tied to the southwest border, Treasury said in a press release.

The action also lands less than a day before the bank reports quarterly earnings Wednesday morning.

Treasury’s Financial Crimes Enforcement Network, which enforces anti-money-laundering rules, said the $1.2 billion penalty is the third-largest in Treasury history. Treasury separately announced an $11.6 million settlement over sanctions violations.

As part of the settlement, Bank of America admitted that it willfully violated the Bank Secrecy Act by failing to maintain a compliant anti-money-laundering program, conduct required due diligence on foreign correspondent accounts and file suspicious activity reports, according to Treasury.

“Today’s actions send a clear message that even the biggest financial institutions are not above the law,” Treasury Secretary Scott Bessent said in the press release.

Bank of America said in a statement to CNBC that the bank has invested billions in compliance and is “far along” in remediation efforts.

The bank said the penalties will result in a $1.2 billion non-tax-deductible charge in its third-quarter results, reducing net income by about 17 cents per share. It said remediation costs are already reflected in its current expense base.

“Financial crime compliance is serious, and we are responsible for getting it right,” spokesperson Christa Robinson said.

The bank’s stock was down about 2% in after-hours trading on the news.

Treasury said the bank “prioritized its revenues” while minimizing the impact on compliance resources. The agency said the bank relied so heavily on law-enforcement inquiries and referrals from other financial institutions that regulators said it effectively outsourced part of its responsibility for detecting suspicious activity. 

The penalty from Treasury’s Financial Crimes Enforcement Network came in coordination with the Office of the Comptroller of the Currency, or OCC, an independent bureau within the department, which announced a $750 million civil money penalty against Bank of America.

That sum, which is credited as part of the $1.21 billion total, is the largest penalty OCC has ever levied, the office said.

The office accused the bank of serious violations of the Bank Secrecy Act and anti-money laundering rules, and of failing to fix its deficiencies in accordance with a cease-and-desist order it signed in 2024. 

“Despite its obligation to the American people as a national-chartered, global systemically important bank, the bank’s BSA/AML compliance program continues to reflect widespread breakdowns in internal controls, which threatens U.S. national and economic security,” Comptroller of the Currency Jonathan Gould said in the OCC press release.

“The bank’s poor response to its BSA deficiencies is unacceptable. The second largest bank’s egregious and continued BSA violations warrant the OCC imposing its largest [civil money penalty] ever assessed against a bank,” Gould said. “The OCC expects all banks to have an effective BSA/AML compliance program. Those that do not can expect swift and significant action from the OCC.”

The 2024 order had identified a “breakdown” in Bank of America’s systems for detecting and reporting suspicious activity, including a “systemic failure” to set appropriate thresholds for triggering investigations. It also said the bank had failed to make “acceptable substantial progress” correcting an earlier customer due diligence problem.

Treasury said the failures included red flags involving possible narcotics-trafficking proceeds, fraud and potential trade-based money laundering that were not addressed in a timely way. 

Bank of America will also be required to conduct a third-party review for suspicious transactions that went undetected and undergo independent reviews of its transaction-monitoring and customer due-diligence programs, Treasury said.

– CNBC’s Hugh Son contributed to this report.