Commentary

Five Billion Dollars They Never Wrote Down

Posted on by Bill McCarthy

Treasury Secretary Scott Bessent’s department announced the penalties on October 13. The total is more than 1.21 billion dollars against Bank of America, the second-largest bank in the country. It is the third-largest penalty in Treasury history and the largest the bank regulator has ever assessed. The bank has admitted it willfully violated the Bank Secrecy Act. It failed to file timely reports on more than five billion dollars in suspicious transactions. More than a billion of that carried national-security flags, including Chinese money-laundering networks and illicit finance tied to the southwest border. The fine is the price of not writing the reports the law required.

What the three offices assessed

The Financial Crimes Enforcement Network assessed 1.2 billion dollars for the failure to mitigate and report priority risks. The Office of the Comptroller of the Currency assessed 750 million dollars, a record for that office, for a Bank Secrecy Act and anti-money-laundering program that was deficient and ineffective. That 750 million is credited against the larger FinCEN figure in the resolution. The Office of Foreign Assets Control settled 475 apparent sanctions violations for 11.6 million dollars. The sanctions programs touched Iran, Russia, Belarus, Burma, Somalia, narcotics, and global terrorism. The apparent violations included processing payments through blocked banks, failing to prioritize exact-name and date-of-birth matches to blocked persons, failing to update watchlists after designations, and mishandling two business accounts through human error. OFAC called the violations non-egregious but largely not self-disclosed.

The bank’s own statement is that third-quarter results will carry a non-tax-deductible charge of 1.2 billion dollars, about seventeen cents a share. It says it has already put substantial people and money into remediation. There is no accompanying criminal action from the Justice Department in the announcement. The civil penalties and the admissions stand alone.

What the bank failed to do

As part of the FinCEN resolution the bank admits three willful failures under the Bank Secrecy Act. It did not implement and maintain an anti-money-laundering program that met the minimum requirements. It did not conduct adequate due diligence on correspondent accounts for foreign financial institutions. It did not file suspicious-activity reports when the activity required them. The core problems were in identifying and reporting suspicious transactions and in customer due diligence. The bank prioritized revenues and kept compliance resources thin. It leaned on law-enforcement inquiries and tips from other banks instead of its own automated controls. Suspicious activity sat uninvestigated for long stretches, so the reports that eventually went out were late. Testing had already flagged the gaps. The bank did not take meaningful action. Customer-due-diligence processes did not account for reliance on payments from unknown third parties and did not answer red flags for narcotics proceeds, trade-based money laundering, and fraud.

The result was the five-billion-dollar reporting hole. More than a billion dollars of the unreported activity implicated national-security and other priority risks: Chinese money-laundering networks, fraud, and potential trade-based money laundering with a substantial nexus to the southwest border. The Comptroller’s office found that the transaction-monitoring system failed to properly watch trillions of dollars in flows, producing large numbers of late reports involving billions, many with money-laundering indicia. Management knew for years that escalation was failing and did not correct it. The Bank Secrecy Act officer and staff lacked the skills and training for accurate, timely reports. The audit function missed the concerns. A December 2024 cease-and-desist order had already required the bank to fix the program. After that order the bank still did not prioritize the work, left steps unfinished, and had further breakdowns, including processing trade-based money-laundering transactions through gaps in the controls.

What happens next

The consent order requires the bank to work with a third party on a lookback to find and report the suspicious transactions that were missed. It must submit to an independent review of the effectiveness of its monitoring, its customer due diligence, its foreign-correspondent due diligence, and its data governance for anti-money-laundering information. The reviews are to test whether the program actually addresses the priority risks: the southwest border, cartels, narcotics trafficking, Iran, and Russia. The bank has committed to improvements in training, testing, audit, and cooperation with the sanctions office. Those obligations sit on top of the 2024 order that was already in force.

The money will be paid. The charge hits this quarter’s earnings. The lookback and the independent reviews will run for as long as the orders say they run. A bank that processes hundreds of trillions of dollars a year and that has already been under a cease-and-desist for nearly two years will now operate with a third party in the monitoring room and with explicit instructions to watch the border flows, the Chinese networks, and the sanctioned jurisdictions it already touched. Bessent’s statement was that institutions of this size are not above the law, and that a failure here exposes the whole system. The five billion dollars that went unreported is the measure of how long the failure lasted. The 1.21 billion dollars is the measure of what the department decided it was worth.

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