By Pete Schroeder, Ismail Shakil and Saeed Azhar
Oct 13 (Reuters) – Bank of America has been fined $1.21 billion by US regulators for widespread failures to detect potential money laundering and other illicit activity, a penalty the bank said will hurt third-quarter earnings.
The Treasury Department said the fine, the third-largest in department history, is due to the bank’s failure to report more than $5 billion in suspicious activity to the government, including $1 billion that posed national security-related and other priority illicit finance risks.
“Financial institutions are on the front lines of protecting our economic and national security,” Treasury Secretary Scott Bessent said in a statement. “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 US financial system to significant illicit finance risks.”
The Treasury said the bank “prioritized its revenues” in building compliance programs, and overly relied on inquiries from outside parties like law enforcement and other financial institutions instead of its own internal controls.
The consent order requires Bank of America to hire an independent third party to review past transactions, identify suspicious activity that the bank failed to detect at the time, and report those transactions to FinCEN.
“Financial crime compliance is serious, and we are responsible for getting it right,” said a Bank of America spokesperson in a statement. “We have invested billions of dollars in technology and dedicated thousands of employees to combat financial crime, and our team is far along with and committed to completing the work required to address the issues raised by our regulators.”
The spokesperson added that the bank’s third-quarter results due for release on Wednesday will include a non-tax-deductible charge of $1.2 billion, which will reduce quarterly net income by approximately 17 cents a share.
Analysts have estimated adjusted EPS of $1.10, according to mean estimates compiled by LSEG, but that excludes one-offs like this fine.
Shares were down 2.7% in after-hours trading after closing the day down 1.1%.
The penalty is likely to add to negative investor sentiment and raise concerns about higher expenses and whether Bank of America can maintain its roughly $6 billion quarterly share buyback pace, UBS analyst Erika Najarian said in a note.
With earnings due on Wednesday, “we think shares likely underperforming at open,” she said.
She noted there was no asset cap, a regulatory penalty that would limit how large the bank could grow.
REGULATOR SAYS COMPLIANCE PROGRAM ‘DEFICIENT AND INEFFECTIVE’
As part of the fine, the Office of the Comptroller of the Currency levied a $750 million civil penalty against the lender, the largest ever for the regulator, citing failures to address shortcomings in its anti-money laundering programs that were identified as part of a 2024 cease-and-desist order from the watchdog.
The regulator said the bank’s compliance program was “deficient and ineffective,” and its transaction monitoring system caused the bank to delay filing suspicious activity reports on billions of dollars of transactions.
In addition, the bank paid an $11.6 million fine to the Office of Foreign Assets Control for over 400 apparent violations of numerous sanctions programs. The Treasury said the bank mistakenly processed millions of dollars in payments that violated sanctions programs targeting countries including Russia and Iran.
The fine comes days after American Express was also hit with a $350 million penalty for similar anti-money laundering shortcomings.
(Reporting by Ismail Shakil, Pete Schroeder and Saeed Azhar; Additional reporting by Arasu Kannagi Basil; Editing by Michelle Nichols, David Gaffen and Jamie Freed)
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