Bank of America's Profit Falls 17% After a $1.2 Billion Money-Laundering Fine: What Customers Should Know

The second-largest U.S. bank was hit with one of the biggest penalties in Treasury Department history a day before it reported a weaker quarter.

Bank of America had a rough two days. On Tuesday, Oct. 13, federal regulators announced more than $1.2 billion in penalties against the bank for failing to properly catch and report suspicious money. On Wednesday, Oct. 14, the bank reported third-quarter results that showed profit down 17% and revenue below what analysts expected. Its shares fell more than 5% in early trading.

Here's what happened, in plain English, and what it means if you bank there or own the stock.

What the regulators said

Banks are required by law to watch for signs of money laundering, which is hiding the source of illegal money by moving it through legitimate accounts, and to report suspicious transactions to the government.

The Treasury Department's Financial Crimes Enforcement Network, known as FinCEN, said Bank of America failed to properly identify and report risks tied to Chinese money laundering networks and illicit finance along the southwest border. FinCEN said the bank failed to report more than $5 billion in suspicious transactions on time and "effectively outsourced" much of its detection work to third parties. FinCEN's penalty was $1.2 billion, which includes credit for a separate fine from the bank's main regulator.

That regulator, the Office of the Comptroller of the Currency (OCC), issued a $750 million penalty, the largest in its history, calling the bank's anti-money-laundering program deficient and ineffective. A third agency, the Office of Foreign Assets Control, settled with the bank for $11.6 million over 475 apparent sanctions violations involving countries and groups such as Iran and Russia.

Treasury called the total the third-largest penalty in the department's history. Treasury Secretary Scott Bessent said that "even the biggest financial institutions are not above the law." Bank of America said that "financial crime compliance is serious, and we are responsible for getting it right," and that it has invested billions of dollars and dedicated thousands of employees to fighting financial crime.

The quarter itself

Bank of America said profit fell 17% from a year earlier, with earnings per share dropping to 91 cents as the fine was recorded. Revenue rose about 3% to roughly $30 billion, but that was held back by lower trading revenue and investment banking fees, and results missed analyst expectations even before counting the penalty, according to reporting on the results.

Chief Financial Officer Alastair Borthwick said the bank had added staff and believes it is now meeting the requirements of a 2024 order from the OCC that told it to fix its anti-money-laundering program.

What this means for your wallet

If you have a checking account, savings account or credit card with Bank of America, the fine does not affect your money. The penalty is paid by the company, and your deposits remain protected by FDIC insurance up to the standard limits. You may notice more questions about large or unusual transactions in the future, since banks under regulatory pressure often tighten how they review account activity. Answering those questions promptly can help avoid delays.

The case is also a reminder of why banks ask about the source of large deposits or wire transfers. Those checks are part of the same rules the bank was fined for not following closely enough.

For investors, Bank of America is one of the largest holdings in many bank and broad-market index funds. A one-time fine reduces this quarter's profit, but long-term investors often focus more on whether the underlying business keeps growing. Spreading money across many companies can limit the damage when one company has a bad week.

This article is for education only and is not financial advice. Everyone's situation is different.