Bank of America Hit With $1.2 Billion Penalty Over Money Laundering Failures, Admits Willful Violations

WASHINGTON — Federal regulators on Tuesday ordered Bank of America to pay more than $1.2 billion in penalties for widespread failures in its defenses against money laundering, saying the nation's second-largest bank left trillions of dollars in transactions inadequately monitored and failed to report billions in suspicious activity.

The Treasury Department said the bank failed to report more than $5 billion in suspicious transactions, including activity potentially linked to Chinese money-laundering networks, drug trafficking and fraud. More than $1 billion of the unreported activity involved national security-related and other priority illicit finance risks, regulators said.

"Even the biggest financial institutions are not above the law," Treasury Secretary Scott Bessent said in a statement.

The penalty comes a day before Bank of America is scheduled to report third-quarter earnings.

Record penalties

The enforcement action includes a $1.2 billion penalty from the Treasury Department's Financial Crimes Enforcement Network, known as FinCEN. It is the third-largest penalty in the department's history, behind a $3.4 billion fine against cryptocurrency exchange Binance in 2023 and a $1.3 billion penalty against TD Bank in 2024.

The Office of the Comptroller of the Currency, which regulates national banks, separately imposed a $750 million civil money penalty, the largest in that agency's history. The OCC penalty will be credited toward FinCEN's assessment rather than added to it.

The Treasury's Office of Foreign Assets Control also reached a separate $11.6 million settlement with the bank over 475 apparent sanctions violations, bringing the total to more than $1.21 billion.

Bank admits willful violations

As part of its settlement with FinCEN, Bank of America admitted that it willfully violated the Bank Secrecy Act, the primary U.S. law aimed at combating money laundering.

The bank admitted that it failed to maintain an anti-money laundering program meeting the law's minimum requirements, failed to conduct required due diligence on accounts held for foreign financial institutions and failed to file required suspicious activity reports.

Regulators said the failures extended across the bank's transaction monitoring systems, customer due diligence and internal oversight.

FinCEN said the bank had effectively outsourced large portions of its responsibility for detecting suspicious activity to law enforcement and other financial institutions, rather than identifying the activity itself.

According to Treasury, the bank prioritized revenue over compliance resources, allowing suspicious transactions to go uninvestigated for long periods despite growing warning signs.

FinCEN said its penalty addressed the bank's failure to mitigate and report priority national security risks, including Chinese money-laundering networks and illicit finance along the southwest border.

Repeated warnings

The OCC said the bank had failed to make adequate progress in fixing its problems despite an earlier enforcement action. In December 2024, Bank of America signed a cease-and-desist order with the OCC requiring it to address deficiencies in its anti-money laundering compliance program.

Comptroller of the Currency Jonathan Gould said the bank's "egregious and continued BSA violations" justified the largest civil money penalty the agency has ever imposed on a bank.

Gould also criticized the bank for failing to address its problems despite repeated warnings, describing the bank's response to the deficiencies as unacceptable.

The OCC said the bank's compliance program had been deficient and ineffective.

Bank of America responds

Bank of America said it would record a $1.2 billion charge in its third-quarter results that is not tax-deductible, reducing net income by about 17 cents per share.

"Financial crime compliance is serious, and we are responsible for getting it right," a Bank of America spokesperson said in an emailed statement.

The spokesperson said the Charlotte, North Carolina-based bank has invested billions of dollars in technology and dedicated thousands of employees to fighting financial crime as it works to resolve the deficiencies.

Shares slip

Bank of America shares fell 1.14% during regular trading Tuesday and dropped more than 2% after the market closed following the announcement.

The penalty adds to pressure on bank stocks this week as the third-quarter earnings season gets underway. On Tuesday, JPMorgan Chase reported results that missed analyst expectations, while shares of several other large banks fell despite stronger-than-expected profits.

Bank of America is scheduled to report its quarterly results Wednesday morning, alongside Morgan Stanley. Investors will be watching for details on how the penalty affects the bank's earnings and any further information about its compliance overhaul.

A massive payment network

Bank of America serves more than 70 million clients and processes about $4.5 trillion in payments for individual customers each year, along with trillions more for corporate clients. The scale of its operations makes effective monitoring systems critical, regulators have said, because gaps can allow large volumes of illicit money to move through the financial system.

Banks are required under the Bank Secrecy Act to monitor transactions, verify customers' identities and report suspicious activity to FinCEN. Those reports help law enforcement track money laundering, drug trafficking, terrorism financing and other crimes.

Growing enforcement focus

The case is the latest in a series of large penalties against major financial institutions over anti-money laundering failures. The 2024 action against TD Bank, which pleaded guilty to Bank Secrecy Act violations, led to restrictions on its growth in the United States.

Regulators did not announce similar growth restrictions on Bank of America on Tuesday, though FinCEN is requiring the bank to take remedial action as part of the settlement.

Federal officials have increasingly emphasized national security concerns in money-laundering cases, particularly involving networks linked to drug cartels and the trafficking of fentanyl and other narcotics across the southern border.