Why Bank of America’s AML Failure Is a Wall Street Warning

Bank of America reported a $1.2 billion non-tax-deductible fine on Oct. 14 for its anti-money laundering (AML) and sanctions program failures, which shaved 17 cents off its per-share net income. Financial crime and AML experts expressed concern that the penalty is a warning sign for the rest of the industry. ThetaRay CEO Brad Levy stated that if every bank were examined, problems would likely be found, comparing it to every home requiring inspections.

The Treasury Department's Financial Crimes Enforcement Network (FinCEN) imposed the third-largest penalty in its history, with $750 million going to the Office of the Comptroller of the Currency and $11.6 million to the Office of Foreign Assets Control for sanctions violations. Bank of America stated that they have invested heavily in technology and dedicated resources to combat financial crime and are working to address the issues raised by regulators.

The penalty may have broader implications beyond the bank's finances, potentially damaging its reputation and business relationships with partners and clients. AML software maker Bretton AI Inc. CEO Will Lawrence emphasized that regulatory trust is more crucial than the monetary penalty, as it could lead to increased scrutiny, limits on growth, and difficulty in expanding.

Lawrence also highlighted the need for advanced transaction monitoring and cross-account, cross-counterparty, and cross-payment channel analysis to detect laundering patterns.