Bank of America Pays $1.2bn Over Money Laundering Failings

Bank of America will pay $1.2bn (£910m) for failing to detect potential money laundering and other illegal activity, the US Treasury Department said on Tuesday.

The penalty is the third-largest the department has ever imposed. It lands less than 24 hours before the bank reports third-quarter earnings on Wednesday morning — and the bank says the hit will show up directly in those numbers.

What went wrong at the bank?

The bank failed to report over $5bn in suspicious activity to the government, the Treasury said. Of that amount, $1bn posed national security and illicit finance risks.

The failures included not flagging transactions that possibly involved Chinese money laundering networks or trade-based laundering "with a substantial nexus to the southwest border," according to the Treasury.

The department said the bank leaned on tips from outside parties — law enforcement, other financial institutions — instead of running its own controls. It "effectively outsourced to third parties a substantial portion of its proactive detection and reporting obligations," the Treasury said.

What does the settlement include?

As part of the settlement, Bank of America admitted it "willfully violated" the Bank Secrecy Act. The admissions cover three specific failures, according to the Treasury:

• Not maintaining a compliant anti-money laundering programme
• Not conducting required due diligence on foreign correspondent accounts
• Not filing suspicious activity reports

The $1.2bn total combines penalties from two regulators: the Office of the Comptroller of the Currency (OCC) and the Office of Foreign Assets Control (OFAC).

The OCC's $750m share is the biggest penalty that regulator has ever levied.

OFAC tied its settlement to 475 apparent violations of sanctions programmes — including those on Russia and Iran, narcotics, and global terrorism. Its portion came to $11.6m, reflecting OFAC's determination that the bank's apparent violations were "non-egregious."

How much will this cost shareholders?

The bank put a precise figure on the damage in an emailed statement: "Our third-quarter results will include a non-tax-deductible charge of $1.2 billion impacting net income by approximately 17 cents per share."

That means the fine is not tax-deductible — a detail that matters for the bottom line. The bank also said remediation is already funded: "We have already dedicated substantial personnel and resources to our ongoing remediation efforts, and those costs are in the current expense base."

In a statement to the BBC, the bank added: "Our team is far along with and committed to completing the work required to address the issues raised by our regulators."

Why does Treasury consider this systemic?

Treasury Secretary Scott Bessent framed the stakes in the announcement: "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 US financial system to significant illicit finance risks."

That's the sharpest signal in the release. Treasury treats a compliance failure at a bank of this scale not as an internal problem but as a risk to the entire US financial system.

The timing guarantees the fine will dominate Wednesday's earnings conversation, with the 17-cent-per-share charge now baked into the quarter before analysts even open the release.

By Grace Kim