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Bank of America fined $1.21 billion as regulators cite failures involving $5 billion in suspicious activity: What went wrong?
Bank of America faces a $1.21 billion US fine over failures to report suspicious transactions, with the penalty expected to hurt quarterly earnings.
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Bank of America has been fined $1.21 billion by US regulators over failures to detect and report suspicious financial activity, including transactions worth more than $5 billion, as per Reuters.
According to the report, the US Treasury Department said more than $1 billion of the unreported activity involved national security concerns and other high-priority risks. The penalty is among the largest in the department’s history and is expected to affect the bank’s third-quarter earnings.
Bank of America failed to flag billions in suspicious activity
The US Treasury said the bank relied too heavily on information from law enforcement agencies and other financial institutions instead of using its own systems to identify potentially suspicious transactions.
Regulators also said the bank prioritised revenue while developing its compliance programmes. Its transaction monitoring systems failed to flag suspicious activity in time, delaying reports to the government.
Under a consent order, Bank of America must appoint an independent third party to review past transactions, identify suspicious activity that went undetected and report it to the Financial Crimes Enforcement Network (FinCEN).
Reuters reported that the Office of the Comptroller of the Currency (OCC) imposed a $750 million civil penalty, the largest in the regulator’s history. The action was linked to shortcomings identified in a 2024 cease-and-desist order.
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Bank says fine will hit quarterly earnings
Bank of America said its third-quarter results, due on Wednesday, will include a $1.2 billion charge that cannot be deducted for tax purposes. According to the bank’s statement cited by Reuters, the charge is expected to reduce quarterly net income by about 17 cents per share.
The bank said it had invested billions of dollars in technology and assigned thousands of employees to tackling financial crime. A spokesperson added that the company was committed to completing the work required by regulators.
The announcement also weighed on investor sentiment. Reuters reported that Bank of America shares fell 2.7% in after-hours trading on Tuesday, after closing the regular session down 1.1%.
UBS analyst Erika Najarian said the penalty could raise concerns about the bank’s expenses and its ability to maintain its roughly $6 billion quarterly share buyback programme, according to Reuters.
Bank also penalised over sanctions violations
Separately, the bank paid an $11.6 million penalty to the Treasury Department’s Office of Foreign Assets Control over more than 400 apparent violations of sanctions programmes.
The Treasury said Bank of America had processed millions of dollars in payments that breached sanctions targeting countries including Russia and Iran, Reuters reported.
The action came days after American Express was hit with a $350 million penalty over similar anti-money laundering shortcomings.
