Bank of America vows to fix compliance after $1.21B fine

Kraken co-CEO Arjun Sethi needed five words to take a shot at Bank of America. "must be a crypto company," he wrote on X on Tuesday evening, linking the Treasury Department's announcement.

The joke lands because of what Treasury says the second-largest US bank did. It admitted willfully violating the Bank Secrecy Act and failed to report more than $5 billion in suspicious transactions.

More than $1 billion of that activity involved national security risks, Treasury said, including Chinese money laundering networks and illicit finance along the southwest border.

Crypto used to be the compliance target

Sethi has spent years on the other side of this argument. Crypto firms were the ones accused of weak compliance, and banks were the ones pulling away from them.

In July, Sethi wrote an open letter after Kraken's parent company, Payward, won a $22 million arbitration award against its former auditor Mazars. "An audit is not a favor. It is oxygen," he wrote.

He cited a January 2023 joint statement from the Fed, FDIC and OCC on crypto risks. He also said the FDIC sent at least 25 letters to 24 banks telling them to pause or hold back crypto activity.

Now the roles look different. Kraken Financial, Payward's Wyoming-chartered bank, received a Federal Reserve master account in March. Kraken called it the first digital asset bank in US history to get direct access to Fedwire.

Former CFTC chair says your crypto wallet is about to replace your bank account (4:35)

In May, Payward applied to the OCC for a national trust company charter. The OCC is the same regulator that just handed Bank of America its largest penalty ever.

Three agencies, one bill

Three agencies acted at once.

• The Financial Crimes Enforcement Network (FinCEN) assessed a $1.2 billion penalty, the third-largest in Treasury history.
• The OCC assessed a $750 million civil money penalty, the largest in its history. CNBC reported that it counts toward the $1.2 billion total.
• The Office of Foreign Assets Control (OFAC) added an $11.6 million settlement over 475 apparent sanctions violations.

The OFAC violations involved programs covering Russia, Belarus, Iran, Burma, Somalia, narcotics and global terrorism.

Bank of America Corporate Center in Charlotte, North Carolina. Photo: Kiran891 / Wikimedia Commons, CC BY-SA 4.0

Revenue over controls

Treasury said the bank "prioritized its revenues" and minimized the impact on compliance resources. It said Bank of America relied on law enforcement inquiries and requests from other financial institutions instead of its own automated controls.

Suspicious activity piled up without investigation for long stretches, Treasury said. That led to late reports of limited use to law enforcement.

The OCC said the bank's transaction monitoring system failed to properly monitor trillions of dollars in transactions. Many of the late reports showed signs of money laundering, it said.

"The bank's poor response to its BSA deficiencies is unacceptable," Comptroller of the Currency Jonathan Gould said in the OCC's release.

The bank was already under order

This was not the bank's first warning. In December 2024 the OCC put Bank of America under a cease and desist order over Bank Secrecy Act deficiencies.

More than a year later, the OCC said, the bank still failed to escalate potentially suspicious activity to investigators. It also processed potential trade-based money laundering because of a gap in transaction monitoring.

The OCC published its civil money penalty order. FinCEN's consent order requires the bank to hire a third party to review past transactions and report anything that went undetected.

It also requires an independent review of the bank's monitoring and customer due diligence programs.

Bank takes the charge, stock slips

Bank of America said it expects a $1.2 billion non-tax-deductible charge in third-quarter results, which are due Wednesday. The company said that will cut net income by about 17 cents a share.

"Financial crime compliance is serious, and we are responsible for getting it right," spokesperson Christa Robinson told CNBC. The bank said it has invested billions of dollars in compliance and is far along in the remediation regulators required.

The stock closed down about 1.1% on Tuesday and fell roughly 2% after hours, according to CNBC and Reuters. Reuters quoted UBS analyst Erika Najarian saying the penalty could add to negative sentiment and raise questions about whether the bank can keep up its roughly $6 billion quarterly buyback pace.

Watchdogs call it a slap on the wrist

Beyond Sethi, the sharpest criticism came from a watchdog. Dennis Kelleher, CEO of Better Markets, called the penalty a "meaningless slap on wrist" in a statement.

• Kelleher said Bank of America has about $3.5 trillion in assets and more than $30 billion in revenue in the last three months alone.
• He said the fine is less than 1% of the bank's expected 2026 revenue of about $125 billion.
• "Banks don't break laws, people do," he said, arguing that executives and supervisors should face personal consequences.

Binance and TD Bank paid more

The $1.2 billion FinCEN penalty is the third-largest in Treasury history. The biggest involved a crypto firm.

• Binance paid a $3.4 billion FinCEN penalty in November 2023, plus a $968 million OFAC settlement.
• TD Bank paid a record $1.3 billion FinCEN penalty in October 2024. It was then the largest against a depository institution.
• Bank of America's $1.2 billion FinCEN penalty followed on Tuesday, joined by a record $750 million from the OCC.

Bank of America's FinCEN penalty compared with Binance and TD Bank. Source: U.S. Treasury, FinCEN

Wall Street keeps courting crypto

Big banks are also moving toward crypto firms. CoinDesk reported on Oct. 5 that Payward is in talks to supply crypto trading liquidity to Wells Fargo, citing two people with direct knowledge. Neither company has confirmed the talks.

Treasury also noted that FinCEN is accepting whistleblower tips on Bank Secrecy Act violations.

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