Bank of America Fined $1.2 Billion for Anti-Money Laundering Failures

Bank of America's third-quarter earnings were impacted by a $1.2 billion fine imposed by the Treasury Department for overlooking significant anti-money laundering and reporting violations. The penalties, announced Tuesday, are linked to the bank's failure to report more than $5 billion in suspicious activity, which included Chinese money laundering networks and narcotics trafficking.

The substantial fine dragged down Bank of America's reported profit to $6.9 billion, or 91 cents per share, a decrease from $8.3 billion, or $1.04 per share, in the same period last year. Excluding the impact of the fine, the bank reported adjusted earnings per share of $1.08, falling slightly short of analyst expectations.

Revenue for the quarter rose to $30 billion from $29 billion, but also missed analysts' consensus estimates of $30.58 billion. The bank's shares fell 5.9% on Wednesday following the earnings release and news of the penalties.

According to the Treasury Department, over $1 billion of the unreported suspicious activity posed national security risks and involved illicit financial activities, particularly related to the southwest border. Treasury Secretary Scott Bessent stated that the failure of a bank of Bank of America's size to uphold its anti-money laundering obligations exposes the entire U.S. financial system to significant risks.

In response, a Bank of America spokesperson emphasized the bank's investment of billions of dollars in technology and thousands of employees dedicated to combating financial crime, noting that remediation costs are already included in the current expense base.

The $1.2 billion penalty includes a $750 million settlement with the Office of the Comptroller of the Currency (OCC), which is the largest fine ever issued by the OCC. Bank of America also agreed to an $11.6 million settlement with the Office of Foreign Assets Control for separate violations related to sanctions on Iran, Russia, narcotics, and global terrorism.

Bank of America admitted to willfully violating the Bank Secrecy Act by failing to implement adequate compliance programs, conduct sufficient due diligence on foreign accounts, and file suspicious activity reports in a timely manner. The Treasury Department indicated that the bank prioritized revenue and compliance resources, effectively outsourcing its detection and reporting duties to law enforcement.

As a consequence of these failures, the bank will be required to engage a third party to review suspicious transactions that were previously overlooked and will undergo an independent review of its suspicious activity monitoring systems.

In separate financial news, Morgan Stanley reported an increase in third-quarter revenue to $20.3 billion, up from $18.2 billion in the previous year, and exceeding expectations. Its net income rose to $4.97 billion, or $3.03 per share, compared to $4.61 billion, or $2.80 per share, a year ago. Despite these positive results, Morgan Stanley shares also declined by 3.5%.