Bank of America fined $1.2 billion for 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 address long-standing anti-money laundering problems.

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

The action also comes less than a day before the bank reports quarterly results 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 for sanctions violations.

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

“Today’s actions send a clear message that even the largest 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 “well advanced” in remediation efforts.

The bank said the sanctions would result in a $1.2 billion non-tax deductible charge in its third-quarter results, reducing net income by about 17 cents per share. She said repair costs are already reflected in her current spending base.

“Combating financial crime is a serious problem and we have a responsibility to get it right,” said spokeswoman Christa Robinson.

The bank’s stock was down about 2% after hours following the news.

The new sanctions will put a renewed focus on the record of longtime CEO Brian Moynihan, who took office in 2010 and spent the early years of his tenure resolving tens of billions of dollars in mortgage-related legal and regulatory issues, largely tied to decisions made before he became CEO.

For much of the past decade, Moynihan has focused on what he calls “responsible growth” as Bank of America sought to distance itself from the risk-taking and legal troubles that followed the 2008 financial crisis.

Moynihan is scheduled to appear on CNBC’s “Squawk on the Street” at 10:20 a.m. ET Wednesday following the bank’s earnings report.

The Treasury said the bank “prioritized its revenue” while minimizing the impact on compliance resources. The agency said the bank relied so much on law enforcement investigations and referrals from other financial institutions that regulators said it had effectively outsourced some of its responsibility for detecting suspicious activity.

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

That amount, which is credited toward the $1.21 billion total, is the largest penalty ever imposed by the OCC, the office said.

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

“Despite its obligations to the American people as a nationally chartered, globally systemically important bank, the bank’s BSA/AML compliance program continues to reflect widespread failures in internal controls, which threaten the national and economic security of the United States,” Comptroller of the Currency Jonathan Gould said in the OCC press release.

“The bank’s poor response to its BSA’s deficiencies is unacceptable. The BSA’s egregious and continued violations of the second largest bank warrant the OCC imposing the largest sanction (civil penalty) ever imposed on a bank,” Gould said. “The OCC expects all banks to have an effective BSA/AML compliance program in place. Those that do not can expect prompt and meaningful action from the OCC.”

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

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

Bank of America will also be required to conduct a third-party review for suspicious transactions that were not detected and to submit to independent reviews of its transaction monitoring and customer due diligence programs, Treasury said.

–CNBC Hugh son contributed to this report.