https://www.thinkadvisor.com/2024/10/31/bofa-says-regulators-may-take-action-over-money-laundering-zelle/

Bank of America Corp. said U.S. regulators may take action against the firm over its efforts to detect suspected money laundering and sanctions violations, as well as its handling of payments on the Zelle network.

Regulators may issue public orders after examining the firm's compliance programs "including transaction monitoring, training, governance and customer due diligence," the bank said in a regulatory filing Tuesday.

The company said it's cooperating and already working to improve those systems.

The Charlotte, North Carolina-based firm said it's also responding to an inquiry from the Consumer Financial Protection Bureau into electronic payments on the Zelle network.

The consumer watchdog is in talks to resolve the case or may bring an enforcement action. Bank of America said it's evaluating next steps, including the possibility of litigation.

Bank of America's stock fell more than 2% on Wednesday before paring some of those losses to trade down 0.4% to $42.36 at 9:42 a.m. in New York.

"Until regulators file formal actions, this issue will remain an overhang and likely to add a little pressure to the stock," JPMorgan Chase & Co. analyst Vivek Juneja said in a note following Bank of America's disclosure. As a result, JPMorgan removed the stock from its analyst focus list, it said.

U.S. authorities have repeatedly expressed dissatisfaction with international banks' programs for detecting, thwarting and reporting illicit cashflows tied to criminal networks and rogue governments.

Outcomes from inquiries can vary dramatically — including regulatory orders that require firms to address specific shortcomings or, in extreme cases, fines that can stretch into the billions of dollars.

In an exceptional case earlier this month, Toronto-Dominion Bank agreed to pay almost $3.1 billion in fines and other penalties and face a cap on its US retail banking assets, after failing to prevent money laundering by drug cartels and other criminals.

Financial Impact

Bank of America said in its filing that, based on its discussions with regulators, it doesn't expect reviews of its programs "will have a material adverse financial impact."

More broadly, the company reiterated its "reasonably possible" future costs for legal matters, beyond what it has already set aside, remains unchanged from the prior quarter, between zero and $800 million.

U.S. regulators have been digging into consumer complaints about how banks handle reported abuses of the Zelle network.

Lawmakers have called for action, saying banks — and their overseers — must do more to protect people from scams on the network, potentially including making victims whole.

In July, larger rival JPMorgan Chase & Co. said the CFPB may seek to punish it over Zelle payments. Like Bank of America, that firm also said it's evaluating next steps, including litigation.