The Office of the Comptroller of the Currency (OCC) has issued a cease-and-desist order against Bank of America, citing significant deficiencies in its anti-money laundering (AML) compliance measures. The order, which has raised eyebrows among financial regulators, points to failures on the part of the bank to file timely reports on suspicious activities and highlights inadequate customer due diligence as key concerns.
According to the OCC, these lapses constitute “unsafe or unsound practices,” particularly related to compliance with the Bank Secrecy Act (BSA) and sanctions regulations. The BSA mandates financial firms to monitor transactions thoroughly and to be vigilant about their customers' identities to help prevent financial crimes — hence underlining the gravity of the situation for Bank of America.
Details from the order reveal the scope of Bank of America’s shortcomings, including deficiencies within its internal controls, governance, independent testing, and training components of its BSA compliance program. For banking experts, these revelations are particularly concerning, as they suggest systemic issues within the bank's compliance framework.
While Bank of America did not admit or deny the allegations made by the OCC, it stated, “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. The work we’ve done so far positions us well to implement the requirements of the consent order.”
The repercussions of the OCC's order are significant, mandatorily laying out required actions for the banking giant. Among the stipulations, the order calls for Bank of America to appoint independent consultants to evaluate the effectiveness of its AML programs and conduct lookback reviews to guarantee all suspicious activities are adequately reported. These remedial measures are necessary for the bank to regain its footing concerning compliance and regulatory expectations.
This latest compliance order from the OCC is not Bank of America’s only regulatory headache. Recently, the U.S. Consumer Financial Protection Bureau (CFPB) filed lawsuits against Bank of America, JPMorgan Chase, and Wells Fargo, accusing them of failing to adequately protect customers from widespread fraud on Zelle, the popular digital payment platform. The lawsuit alleges the banks’ negligence has led to customers losing more than $870 million since Zelle's launch, placing immense scrutiny on banking practices associated with electronic transactions.
Adding to the pressure, Bank of America is currently facing legal action from UBS Group AG over indemnification related to risky mortgages issued before the 2008 financial crisis. UBS’s lawsuit seeks $200 million, claiming Bank of America failed to cover certain legal costs agreed upon earlier, which has raised questions about the bank's historical financial liabilities.
Investors are closely watching how Bank of America handles these challenges, especially as the bank's share price has experienced volatility amid these issues. Over the past six months, shares of Bank of America have gained 11.5%, but this lags behind the 19.5% growth seen across the industry. Stakeholders are particularly attentive to the bank's strategic responses to these regulatory demands and lawsuits.
Overall, the findings from the OCC serve as a stark reminder of the rigorous compliance environment financial institutions must navigate, with penalties potentially impacting both reputation and operational stability. Bank of America's recent troubles highlight the risks inherent in financial services, particularly as regulators ramp up scrutiny on compliance measures to strengthen oversight and accountability.
With increasing demands for transparency and consumer protection, how Bank of America addresses its compliant shortfalls will be pivotal for its future financial health and regulatory standing.
