- Bank of America Corp. (NYSE: BAC) faces more than $1.21 billion in regulatory penalties after US authorities found serious failures in its anti-money-laundering controls and sanctions compliance, adding a substantial charge to the bank's third-quarter results.
Bank of America faces one of the largest regulatory penalties in US Treasury history after federal authorities announced enforcement actions on October 13 over failures to identify and report suspicious financial transactions.
The US Treasury Department's announcement outlined more than $1.21 billion in penalties involving the Financial Crimes Enforcement Network (FinCEN), the Office of the Comptroller of the Currency (OCC) and the Office of Foreign Assets Control (OFAC).
Regulators said the bank failed to report more than $5 billion in suspicious transactions in a timely manner. More than $1 billion of that activity involved national security-related and other priority illicit-finance risks, including transactions potentially connected to Chinese money-laundering networks, fraud and trade-based money laundering.
The enforcement actions raise questions about the bank's compliance controls and the cost of resolving longstanding regulatory problems. They also arrive as investors assess third-quarter results across the banking sector, including how higher Treasury yields affect bank earnings and financial markets.
What Regulators Found and How Bank of America Responded
FinCEN assessed a $1.2 billion penalty against Bank of America, N.A., for failing to mitigate and report priority national security risks. The agency said the bank failed to maintain an anti-money-laundering program that met legal requirements, conduct appropriate due diligence on certain foreign correspondent accounts and file required suspicious activity reports.
The OCC's separate enforcement announcement detailed a $750 million civil penalty over deficiencies in the bank's Bank Secrecy Act and anti-money-laundering compliance program. The regulator said the bank had not adequately corrected problems identified in a December 2024 cease-and-desist order.
The $750 million OCC penalty is credited toward FinCEN's $1.2 billion penalty, so those two figures should not be added together as separate costs. OFAC also announced an $11.6 million settlement concerning 475 apparent sanctions violations involving programs related to Iran, Russia, narcotics and global terrorism. Together, the actions amount to more than $1.21 billion.
FinCEN said Bank of America admitted to willfully violating the Bank Secrecy Act. Regulators also cited weaknesses in transaction monitoring, customer due diligence and internal escalation procedures, saying the bank relied too heavily on outside inquiries and referrals to identify potentially suspicious activity.
The resolution requires the bank to work with a third party to review past transactions and identify suspicious activity that may have gone undetected. It also requires independent reviews of monitoring systems, customer due diligence, correspondent-account controls and relevant data governance.
Bank of America said it had invested billions of dollars in technology and employed thousands of people to combat financial crime. A spokesperson told USA Today that the bank was committed to completing the work required by regulators.
The case follows a 2024 regulatory order and highlights the potential financial and operational consequences when compliance improvements fall short of regulators' expectations.
How the $1.21 Billion Fine Affects Bank of America Earnings and BAC Stock
Bank of America said its third-quarter results would include a $1.2 billion non-tax-deductible charge related to the enforcement action. The bank estimated that the charge would reduce quarterly net income by approximately 17 cents per share.
The effect was reflected in the results reported on October 14. Bank of America posted third-quarter net income of $6.9 billion, or $0.91 per share, compared with $8.3 billion, or $1.04 per share, a year earlier. Excluding the fine, earnings were $1.08 per share, still below analysts' consensus estimate of $1.10.
The penalty was not the only pressure on quarterly performance. Reuters reported that sales and trading revenue fell 5% to $5.1 billion, while investment banking fees declined 11% to $1.8 billion. The combination of the regulatory charge and weaker capital-markets revenue complicated the earnings picture.
For investors tracking third-quarter results across major US banks, the distinction between reported and adjusted earnings is important. The charge substantially reduced reported profit, but the adjusted figure also fell short of analysts' expectations, indicating that the fine was not the only issue affecting the quarter.
The bank's regulatory costs could also extend beyond the immediate penalty. Required transaction reviews, independent audits, technology upgrades and additional compliance resources may involve ongoing expenses. The final financial impact will depend on how the remediation work proceeds and whether further weaknesses are identified.
The announced penalty does not, by itself, establish a permanent deterioration in Bank of America's earnings power. Investors will need to assess future results alongside the bank's operating revenue, expenses, credit quality and progress in meeting regulatory requirements.
The central issue is whether Bank of America can demonstrate that its compliance controls have improved while maintaining earnings performance. The fine is a significant near-term setback, but subsequent regulatory findings, remediation costs and quarterly results will determine how much longer the issue weighs on the bank's financial outlook.