Bank of America has been fined a total of $1.2bn for failures to detect and report suspicious financial activity, the BBC reports. The US Treasury announced the decision on 13 October. According to its findings, the bank failed to report more than $5bn in suspicious activity, including $1bn involving national security and illicit finance risks.
The case concerns the bank’s monitoring obligations, rather than a finding that all the transactions identified amounted to money laundering. Suspicious activity must be detected, assessed and reported as required; its total value is not equivalent to the amount involved in proven criminal conduct.
Regulators say bank relied too heavily on outside alerts
According to the BBC, the Treasury accused Bank of America of relying too heavily on enquiries from law enforcement agencies and other financial institutions, rather than its own systems for detecting and reporting suspicious activity. The failures included not flagging transactions potentially linked to Chinese money laundering networks and trade-based money laundering. The Treasury said this activity had a significant connection to the south-western US border.
The Treasury said, in findings reported by the BBC, that the bank admitted as part of the settlement to wilfully violating the Bank Secrecy Act, the US law setting out financial institutions’ anti-money laundering obligations. The violations concerned the failure to maintain a legally compliant programme, carry out the required due diligence on foreign correspondent accounts — used for transactions between banks — and report suspicious activity.
The $1.2bn total includes penalties imposed by the Office of the Comptroller of the Currency (OCC), a US banking regulator, and the Office of Foreign Assets Control (OFAC), which enforces financial sanctions. The OCC penalty was $750m and, according to the BBC, was the largest the regulator had imposed. It is not an additional amount on top of the announced total.
The OFAC settlement amounted to $11.6m and concerned 475 alleged violations of sanctions programmes, including those relating to Russia, Iran, narcotics and global terrorism. The agency classified them as “non-egregious”, meaning they were not placed in its most serious category of violations. The settlement should not be confused with a separate criminal conviction.
Bank outlines earnings charge and remedial work
Bank of America told the BBC that work to address the problems identified by regulators was well advanced. It also said it had committed significant resources and staff to that work. The statement does not, however, mean that the remedial measures have been completed.
The bank said it would recognise a non-tax-deductible charge of $1.2bn in its third-quarter results. It expected the impact on net income to be around 17 cents per share. These are the bank’s projections for how the penalty will affect its accounts, rather than published quarterly results.
