Bank of America fined $1.2 billion by Treasury Department for money laundering and violating sanctions laws

The U.S. Treasury Department announced Tuesday that it was fining Bank of America more than $1.2 billion, accusing the bank of violating anti-money laundering and sanctions laws.

The bank, which is the second-largest bank in the United States, failed to mitigate or report “priority national security risks, including Chinese money laundering networks and illicit financing along the southwest border,” the Treasury Department said in its 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 U.S. financial system to significant illicit financing risks,” Treasury Secretary Scott Bessent said in a statement.

“Today’s actions send a clear message that even the largest financial institutions are not above the law,” Bessent added.

In a statement, Bank of America said it was working with regulators to reach sanctions solutions.

“We have invested billions of dollars in technology and dedicated thousands of employees to fighting financial crime, and our team is well advanced and committed to completing the work required to resolve the issues raised by our regulators,” a Bank of America spokesperson said. “We will continue to support federal and local law enforcement with thousands of investigations and report hundreds of thousands of suspicious activity reports each year. »

The spokesperson also said the sanction imposed by the Treasury Department would impact the company’s quarterly results, which are expected to be released on Wednesday.

“Our third quarter results will include a non-tax deductible charge of $1.2 billion, impacting net income by approximately 17 cents per share. We have already dedicated significant personnel and resources to our ongoing remediation efforts, and these costs are within the current expense base,” the spokesperson said.

The $1.2 billion fine is the third largest ever imposed by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), following a record $3.4 billion fine against Binance in 2023 and a $1.3 billion fine against TD Bank in 2024. Both fines also came with charges from the Justice Department, although there was no Justice Department action for Bank’s fine of America.

The second Trump administration took action against large banks for the practice of “debanking,” notably through executive orders. Earlier this year, President Donald Trump also filed a $5 billion personal lawsuit against JPMorgan Chase, alleging the nation’s largest bank closed its account for political reasons. However, the fine against Bank of America constitutes the largest anti-money laundering penalty the Trump administration’s Treasury Department has imposed on a major bank.

As part of the total fine, $750 million will be paid to the Office of the Comptroller of the Currency (OCC) as a civil penalty, making it the largest OCC penalty in history.

As part of the settlement, Bank of America admitted that it intentionally failed to put in place appropriate safeguards and failed to report any suspicious activity, the Treasury Department said.

Bank of America failed to respond in a timely and meaningful manner to red flags involving suspicious customers, including those with ties to narcotics trafficking, even after compliance staff raised concerns, Treasury said. As a result, the bank, which processed more than $9 trillion in transactions last year, failed to report more than $5 billion in suspicious activity.

CNN has learned that Bank of America’s sanctions screening filter had a design flaw that prevented it from appropriately prioritizing certain potentially prohibited transactions. Specifically, when a transaction matched the name and date of birth of an individual on the U.S. Treasury Department’s sanctions list, the bank’s system did not mark the transaction as high priority. The Treasury Department maintains a list of thousands of individuals and entities, including terrorists, narcotics traffickers, and sanctioned companies, whose assets may be blocked and who are generally prohibited from transacting with U.S. persons or entities.

These outages can harm American sanctions programs, particularly Iranian counter-narcotics programs, which was the case with Bank of America, CNN has learned.

Dennis Kelleher, CEO of Better Markets, which advocates for tighter regulation of banks, said in a statement that the $1.2 billion fine was small compared to Bank of America’s revenue.

“Banks don’t break laws, people do, and until those people – including, importantly, executives and supervisors – are personally and significantly punished through firings, lawsuits, fines and banning from employment in the industry, these crimes will not stop,” Kelleher said.

Bank of America (BAC) stock fell more than 2.5% in after-hours trading after the fine was announced.

“The OCC and FinCen send a message to BoA and all the banks: If you don’t resolve the problem quickly, they will be fined heavily,” said Aaron Klein, former assistant secretary for economic policy at the Treasury Department under President Barack Obama. “The OCC and FinCen can impose many sanctions beyond money – they can essentially fire people not only from BoA but from the entire banking industry.”

“Everything the OCC asks of the BoA to strengthen its anti-money laundering compliance program costs money, thereby reducing banks’ profits,” Klein added.

CNN’s Matt Egan contributed reporting.