Bank of America fined $1.2bn for money laundering failures

The United States Treasury Department has imposed a substantial fine of $1.21 billion on Bank of America, the third-largest penalty in its history. The penalty is a result of the bank's failure to report over $5 billion in suspicious activity to authorities, including $1 billion transactions posing national security risks. US Treasury Secretary Scott Bessent emphasized that when a bank of this size fails to meet its anti-money laundering and sanctions obligations, it jeopardizes the entire US financial system.

The consent order from the Treasury Department requires Bank of America to hire an independent third-party review firm to identify and report previously undetected suspicious transactions. The bank has acknowledged its responsibility and stated that it has invested heavily in technology and personnel to combat financial crime. However, the bank's third-quarter earnings, due to be released on Wednesday, will be impacted by a non-tax-deductible charge of $1.2 billion, reducing net income by approximately 17 cents per share.

Analysts have projected an adjusted earnings per share (EPS) of $1.10, excluding one-off items like this fine. Shares of Bank of America fell 2.7% in after-hours trading, closing down 1.1%. The fine is likely to have a negative impact on investor sentiment and raise concerns about the bank's ability to maintain its substantial quarterly share buyback program.

The Office of the Comptroller of the Currency also levied a $750 million civil penalty against the bank, the highest ever issued by the regulator, for not adequately addressing deficiencies in its anti-money laundering programs.