Bank of America has been fined more than $1.2 billion by the US Treasury Department over serious failures in its systems for detecting money laundering and preventing transactions involving sanctioned individuals and organisations. The penalty, announced on Tuesday, October 13, ranks among the largest financial penalties imposed by US regulators for violations of anti-money laundering requirements.
According to the Treasury Department, the country’s second-largest bank failed to adequately identify and report suspicious financial activity linked to potential national security threats, including Chinese money laundering networks and illicit transactions along the US-Mexico border.
The bank has acknowledged shortcomings in its compliance systems and said it is working with regulators to implement the necessary improvements.
The case highlights growing scrutiny of financial institutions responsible for monitoring enormous volumes of transactions and preventing illicit funds from entering the banking system.
Credits: CNBC
More than $5 billion in suspicious transactions went unreported
The Treasury Department accused Bank of America of failing to respond appropriately to warning signs involving suspicious customers, including individuals allegedly connected to narcotics trafficking. In some instances, compliance employees had raised concerns internally, but the bank allegedly failed to take timely or meaningful action.
Regulators said these shortcomings resulted in more than $5 billion in suspicious activity going unreported. The scale of the alleged failures is significant given that Bank of America processed more than $9 trillion in transactions during the previous year.
US Treasury Secretary Scott Bessent said compliance failures at an institution of this size could expose the broader American financial system to considerable risks. He also stressed that large financial institutions remain subject to the same legal obligations as other businesses.
As part of the settlement, Bank of America admitted that it had wilfully failed to maintain adequate safeguards and report suspicious activity, according to the Treasury Department.
Sanctions screening system contained a critical flaw
Beyond its anti-money laundering shortcomings, Bank of America faced scrutiny over a design flaw in its system for screening transactions against US sanctions lists.
According to CNN, the system did not automatically assign high priority to certain transactions matching both the name and date of birth of an individual on a Treasury Department sanctions list. Such lists cover individuals and organisations subject to US restrictions, including suspected terrorists, drug traffickers and sanctioned companies.
The weakness raised concerns about the bank’s ability to identify potentially prohibited transactions and enforce sanctions-related requirements. Programmes targeting Iran and narcotics trafficking were among those potentially affected by the screening deficiencies.
Sanctions screening and suspicious activity reporting are important safeguards against the movement of illicit funds. Failures in these systems can make it harder for authorities to identify criminal networks and enforce financial restrictions.
One of the largest financial penalties in US history
The $1.2 billion penalty is the third-largest imposed by the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN. The largest was a $3.4 billion penalty against cryptocurrency exchange Binance in 2023, followed by a $1.3 billion fine against TD Bank in 2024.
Of Bank of America’s total penalty, $750 million will go to the Office of the Comptroller of the Currency, marking the largest civil penalty in that regulator’s history. Unlike the Binance and TD Bank cases, the settlement has not been accompanied by a separate enforcement action from the US Justice Department.
The action also represents the largest anti-money laundering penalty imposed on a major bank by the Treasury Department during US President Donald Trump’s second administration.
Credits: Quartz
Bank of America pledges compliance improvements
Bank of America said it had already invested billions of dollars in technology and deployed thousands of employees to combat financial crime. A spokesperson said the bank was working to complete the improvements required by regulators.
The bank also highlighted its continued cooperation with law enforcement agencies, including assistance with thousands of investigations and the filing of hundreds of thousands of suspicious activity reports annually.
However, the financial penalty will have an immediate impact on its reported earnings. Bank of America said it would record a non-tax-deductible charge of approximately $1.2 billion, reducing net income by around 17 cents per share in its third-quarter results, scheduled for release on Wednesday.
Investors reacted negatively to the announcement, with the bank’s shares falling more than 2.5% in after-hours trading.
