The Office of the Comptroller of the Currency (OCC) has directed Bank of America to overhaul its anti-money laundering (AML) program following findings of "systemic failure" and significant deficiencies in handling suspicious transactions. This action underscores heightened regulatory scrutiny aimed at curbing financial crimes within major banks.
The OCC issued a cease-and-desist order on Monday, stating that Bank of America failed to establish and maintain an AML program that complies with the Bank Secrecy Act (BSA). The act mandates financial institutions to monitor transactions, verify customer identities, and promptly report suspicious activities, such as unusual wire transfers or atypical spending patterns.
Bank of America acknowledged the regulatory action, emphasizing its ongoing collaboration with the OCC. “We have been working closely with the Office of the Comptroller of the Currency over the past year to make improvements to our anti-money laundering and sanctions programs,” a spokesperson for the bank said. “The work we’ve done so far positions us well to implement the requirements of the consent order.”
The OCC noted that Bank of America has already begun addressing the issues identified in its AML and sanctions-compliance programs. Despite these efforts, the regulator highlighted a fundamental breakdown in the bank's policies, procedures, and processes for identifying, evaluating, and reporting suspicious activities. To ensure compliance, the OCC’s order requires the bank to engage an independent consultant to assess its adherence to BSA requirements, sanctions regulations, and anti-money laundering laws.
Investors were not entirely surprised by the announcement, as Bank of America had disclosed in October that it was in discussions with regulators regarding its AML programs. At the time, the bank expressed confidence that the issues would not significantly impact its financial performance. Bank of America, the second-largest U.S. lender by assets behind JPMorgan Chase, also noted in its October filing that it was proactively addressing compliance concerns.
This enforcement action is part of a broader regulatory crackdown on large banks failing to comply with the BSA. In September, the OCC targeted Wells Fargo for weaknesses in its financial-crimes risk management. Similarly, in a striking move, the OCC imposed a growth cap on TD Bank in October due to long-term failures to adequately manage risk and prevent money laundering—a rare and severe penalty in the banking industry.
Experts point to a growing trend of stricter enforcement. Sharon Cohen Levin, co-lead of Sullivan & Cromwell's national security practice, remarked, “We have seen over the last few years a more aggressive enforcement environment and higher expectations for [Bank Secrecy Act] compliance.” Levin’s comments reflect a regulatory landscape where adherence to financial-crime prevention laws is under intense scrutiny.
The OCC’s actions have already had a ripple effect on Bank of America’s stock performance. Shares fell 1.3% on Monday, initially dropping sharply after the regulator’s announcement before recovering some losses. Despite this setback, Bank of America’s stock has performed strongly in 2024, rising 29% and outpacing the S&P 500’s 26% increase.
Wealth advisors and RIAs should closely monitor developments in this case and similar regulatory actions, as they signal heightened risks and compliance expectations for financial institutions. Understanding these dynamics is critical for advising clients with exposure to large banking stocks and navigating the evolving regulatory landscape.
