Bank of America, Corp. (BAC) has received a significant cease-and-desist order from the Office of the Comptroller of the Currency (OCC) addressing serious deficiencies under the Bank Secrecy Act (BSA) and its sanctions compliance programs. The BSA is key to preventing financial crimes, as it mandates financial institutions to effectively monitor transactions and validate customer identities.
The latest order against Bank of America outlines multiple violations, including inappropriate practices and failure to address deficiencies relating to suspicious activity reporting and Customer Due Diligence processes. The OCC's findings pointed to significant weaknesses within Bank of America’s internal controls, governance, independent testing, and training components of its compliance program.
The details of the order require Bank of America to undertake substantial remedial measures to strengthen its BSA and anti-money laundering (AML) initiatives. Among these measures is the necessity to appoint an independent consultant tasked with evaluating the effectiveness of these programs and conducting retrospective reviews to guarantee thorough reporting of all suspicious activities.
Interestingly, Bank of America did not admit to or deny the OCC's findings and faced no monetary penalties from the order. The bank 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 bank also expressed confidence, noting they do not anticipate these compliance issues will have material financial repercussions.
Meanwhile, Bank of America is entangled with other regulatory scrutiny. On the same day the cease-and-desist order surfaced, the U.S. Consumer Financial Protection Bureau (CFPB) filed a lawsuit challenging BAC along with two other major banking institutions—JPMorgan Chase and Wells Fargo—for failing to effectively protect customers from extensive fraud conducted on Zelle, the popular payment network. Allegations claim customers have lost over $870 million due to this negligence.
This recent wave of regulatory issues paints a concerning picture for Bank of America, particularly as July brought another legal battle when UBS Group AG filed suit against them for $200 million. This lawsuit accused Bank of America of neglecting to cover legal costs linked to risky mortgages issued prior to the 2008 financial crisis. The UBS complaint revealed prolonged discussions between the two firms concerning indemnification obligations, which reportedly included approximately $53 million of legal costs.
The confluence of these events raises questions about Bank of America’s compliance strategies moving forward. After stepping up oversight on anti-money laundering protocols, both banking regulators and consumer advocacy groups are likely keeping vigilant eyes on BAC to see if these measures result in systemic improvements.
The OCC order highlights the necessity for financial institutions to adhere to strict regulatory standards, particularly considering the increasing risks involved with modern banking practices and digital transactions. Bank of America must act decisively to address these compliance gaps and restore investor and consumer confidence, especially with the scrutiny from both regulators and the public intensifying.
Given the rapid evolution of technology within financial transactions, organizations like Bank of America are at the forefront of addressing challenges posed by fraud and compliance. The measures outlined by the OCC will not only impact BAC's operations but may set precedents for how major financial institutions respond to similar regulatory demands. The spotlight on such institutions continues to grow, as does the expectation for transparency and accountability.
