Bank of America has been hit with a $1.2bn fine after US authorities found major failures in its efforts to detect suspicious financial activity.
These included transactions potentially linked to money laundering and sanctions violations.
The US Treasury Department said the bank failed to report more than $5bn in suspicious activity, with $1bn posing national security and illicit finance risks.
But how did such a large financial institution miss so much?
According to the Treasury, the bank relied too heavily on information from law enforcement and other financial institutions.
Instead of using its own systems to identify potential wrongdoing.
Investigators cited transactions possibly connected to Chinese money laundering networks and illicit trade near the US-Mexico border.
As part of the settlement, the bank admitted it had “willfully violated” the Bank Secrecy Act.
This was by failing to maintain a compliant anti-money laundering programme and meet reporting requirements.
Treasury Secretary Scott Bessent warned that such failures could expose the entire US financial system to significant risks.
Regulatory Failures And Financial Fallout
The penalty includes a record $750m fine from the Office of the Comptroller of the Currency.
Separate sanctions violations involved Russia, Iran, narcotics and global terrorism.
Bank of America said it was committed to addressing regulators’ concerns.
The fine will also reduce its third-quarter net income by an estimated 17 cents per share.
The timing is awkward, arriving just before the bank’s earnings announcement.
But beyond the financial hit, the case raises a bigger question: how can banks protect the financial system if their own safeguards fail?
