Treasury Fines Bank of America $1.2 Billion Over Money-Laundering and Sanctions Violations

On the eve of its third-quarter earnings report, Bank of America was hit today, Oct. 13, with the third-largest penalty in Treasury Department history.

Treasury's Financial Crimes Enforcement Network (FinCEN) assessed $1.2 billion against the nation's second-largest bank. The Office of the Comptroller of the Currency (OCC) announced a $750 million civil money penalty, which is credited toward that total. The OCC says it is the largest penalty it has ever levied.

Treasury separately announced an $11.6 million settlement with its Office of Foreign Assets Control (OFAC).

What Treasury says the bank did

Treasury says Bank of America failed to timely report more than $5 billion in suspicious transactions to FinCEN. Over $1 billion of that activity, Treasury said, involved national security and other priority illicit-finance risks. The department listed transactions indicative of Chinese money laundering networks, fraud, and potential trade-based money laundering with a substantial nexus to the southwest border.

As part of the settlement, Treasury says, the bank admitted it willfully violated the Bank Secrecy Act. The department says the bank admitted it failed to maintain a compliant anti-money-laundering program, failed to conduct required due diligence on foreign correspondent accounts, and failed to file required Suspicious Activity Reports.

Treasury also said the bank "prioritized its revenues" while minimizing the impact on compliance resources. It said the bank leaned so heavily on law-enforcement inquiries and referrals from other financial institutions that it effectively outsourced part of its responsibility for spotting suspicious activity.

The sanctions settlement

The OFAC deal settles the bank's potential civil liability for 475 apparent violations of multiple sanctions programs. Treasury says the bank processed millions of dollars in payments in apparent violation of programs targeting Russia, Belarus, Iran, Burma, Somalia, narcotics, and global terrorism.

The scale is considerable. Bank of America has more than 70 million clients and processes about $4.5 trillion a year in payments for individual customers. It also handles $450 trillion in payments for corporate customers, including payrolls, corporate credit cards and supplier payments.

The bank's response

Bank of America says it has already spent heavily to fix the problems. In a statement, the bank said it has invested billions in compliance and is "far along" in remediation. Spokesperson Christa Robinson said: "Financial crime compliance is serious, and we are responsible for getting it right."

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

Treasury Secretary Scott Bessent said: "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 added: "Today's actions send a clear message that even the biggest financial institutions are not above the law."

What the numbers show

The penalty is large, but the bank is larger. The $1.2 billion charge works out to roughly 17 cents a share by the bank's own math. Bank of America shares fell about 2% in after-hours trading following the announcement.

The nature of the unreported activity is the more serious part. Treasury ties more than $1 billion of it to national security risks, including Chinese laundering networks and activity near the southwest border. Those are the channels where banks are supposed to be the front-line filter.

No individual executives were named in the announcements. Treasury has not announced any charges against individuals, and none are mentioned in its statement.

What comes next

Bank of America is scheduled to report third-quarter earnings shortly before 7:00 a.m. ET on Wednesday, Oct. 14. That report will be the first to show how the $1.2 billion charge lands in the bank's results, and whether its description of remediation as "far along" is backed by the numbers it presents.