By Saeed Azhar, Arasu Kannagi Basil and Pete Schroeder
NEW YORK, Oct 14 (Reuters) - Bank of America has reshuffled staff to address issues brought up by regulators after fining the bank $1.21 billion over anti-money laundering compliance failures, the bank said on Wednesday, stressing that significant work has been done to fix the problems.
The bank was fined by the Treasury Department and the Office of the Comptroller of the Currency for widespread failures to detect potential money laundering and other
illicit activity, in an action announced on Tuesday.
It was also penalized with a consent order, a form of regulatory punishment, that requires Bank of America to hire an independent third party to review past transactions, identify suspicious activity that the bank failed to detect at the time, and report those transactions to FinCEN.
"We've completed a lot of the work required in that consent order, and we've made substantial investments in our program, that's in people and in technology," Borthwick told an analyst briefing on Wednesday.
CEO Brian Moynihan told the analyst briefing that the spending to fix the issues is "in the run rate," indicating it is already reflected in its expense outlook.
He said 1,000 people have been repositioned from other units to fix these issues and create efficiencies.
The consent order against BofA does not impose any asset cap - a regulatory penalty that would limit how large the bank could grow - nor would crowd out any other business activity the bank does, Borthwick said.
'SYSTEMIC FAILURE' CITED
The problems stem back to 2024 when the OCC dinged the bank, saying the lender had a "systemic failure" in running a program that complied with anti-money laundering policies.
The regulator said in 2024 the bank's transaction monitoring system was insufficient, the bank failed to devote sufficient resources to investigating suspicious activity, and had deficiencies in its customer due diligence programs.
Shares of Bank of America opened 8% lower, hitting their lowest price since May.
"Bank of America will need to demonstrate to regulators that it has fundamentally corrected the deficiencies in its anti-money laundering compliance program. Importantly, regulators will want to see sustained compliance rather than temporary corrective measures," said Michael Padula, a former Justice Department trial attorney.
"The government is clearly sending a message that even the largest financial institutions face substantial financial consequences when they fail to meet their anti-money laundering obligations." he said.
Consent orders are onerous for a bank.
Smaller rival Citigroup is seeking to rapidly resolve its efforts to address regulatory demands that have long dogged the third-largest US bank, in order to fully re-focus on growth, Reuters reported on Monday, citing according to two people familiar with the matter.
In June last year the U.S. Federal Reserve announced on that Wells Fargo will no longer have to operate under a $1.95 trillion asset cap the regulator imposed on the bank in 2018 following its long-running sales practices scandal.
The action against BofA dates back to the 2024 OCC consent order and investigation that predated that, Borthwick said.
"It just takes some period of time for the Office of the Comptroller of the Currency (OCC) to conclude their work before they establish a report and before they figure out what is the appropriate result of that report," he said.
Separately, the OCC issued a report on Wednesday finding that several of the country's largest banks including Bank of America unfairly denied banking services to some clients on political, religious or other grounds, but stopped short of imposing fines or other penalties.
President Donald Trump said in a CNBC interview last year that he personally was discriminated against by banks, asserting that JPMorgan Chase and Bank of America refused to take his deposits following his first term in office.
Large banks have denied rejecting customers on political or religious grounds, arguing instead that years of aggressive regulatory pressure discouraged them from serving certain sectors and urging Washington to establish clearer rules on who they can and cannot serve.
(Reporting by Saeed Azhar, Arasu Kannagi Basil and Pete Schroeder; Editing by Megan Davies and Nick Zieminski)
